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________________________________________________________________________________


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, DC 20549




---

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934




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(Mark One)



|    |                                                                                           
|--- | ------------------------------------------------------------------------------------------
|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
     THE SECURITIES EXCHANGE ACT OF 1934



| |  |                                            
| |  | -------------------------------------------
| |  | For the fiscal year ended December 31, 2002

OR



| |      |                                                                                               
| | ---- | ----------------------------------------------------------------------------------------------
| | [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
     THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 001-15941

UTEK CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER)


|                                                                                 |  |                                      
|-------------------------------------------------------------------------------- |  | -------------------------------------
|DELAWARE                                                                         |  | 59-3603677                           
|(STATE OR JURISDICTION OF
    INCORPORATION OR ORGANIZATION)                     |  | (IRS EMPLOYER
    IDENTIFICATION NO.)
|                                                                                
|202 S. WHEELER STREET, PLANT CITY, FL(ADDRESS OF PRINCIPAL EXECUTIVE
    OFFICE) |  | 33566(ZIP CODE)                      

REGISTRANTS TELEPHONE NUMBER, INCLUDING
AREA CODE:  (813) 754-4330

SECURITIES REGISTERED PURSUANT TO SECTION 12(B)
OF THE ACT:

|                             |  |                         
|---------------------------- |  | ------------------------
|                             |  | NAME OF EACH EXCHANGE ON
|TITLE OF EACH CLASS          |  | WHICH REGISTERED        
|                             |  |                         
|COMMON STOCK, $.01 PAR VALUE |  | AMERICAN STOCK EXCHANGE 

SECURITIES REGISTERED PURSUANT TO SECTION 12(G)
OF THE ACT:

NONE

Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 12 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods
as the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days. YES x NO
o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the Act).
YES o  NO
x

The aggregate market value of the
registrants common stock held by non-affiliates of the
registrant as of June 28, 2002 was approximately
$12,315,162 based upon the last sale price for the
registrants common stock on that date. As of
March 23, 2003 there were 3,925,672 shares of the
registrants common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive
proxy statement for the Annual Meeting of Shareholders are
incorporated by reference into Part III of this report.



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TABLE OF CONTENTS



|                                                                                              |                                                                                               |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                                       
|                                                                                              | Item 1. Business                                                                             
|                                                                                              | Item 2. Properties                                                                           
|                                                                                              | Item 3. Legal Proceedings                                                                    
|                                                                                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                                                                      
|                                                                                              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|                                                                                              | Item 6. Selected Financial Data                                                              
|                                                                                              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                              | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                           
|                                                                                              | Item 8. Financial Statements and Supplementary Data                                          
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|PART III                                                                                     
|Item 10. Directors and Executive Officers of the Registrant                                  
|                                                                                              | Item 11. Executive Compensation                                                              
|                                                                                              | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                                                              | Item 13. Certain Relationships and Related Transactions                                      
|                                                                                              | Item 14. Controls and Procedures                                                             
|PART IV                                                                                      
|                                                                                              | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES                                                                                   
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER                                                     
|CERTIFICATION OF CHIEF FINANCIAL OFFICER                                                     
|EXHIBIT INDEX                                                                                
|Ex-99.2 CEO Certification                                                                    
|Ex-99.3 CFO Certification                                                                    



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TABLE OF CONTENTS

|              |  |                                                                                           |    |  |    | 
|------------- |  | ----------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I        |  |                                                                                           |    |  |    | 
|ITEM 1.       |  | BUSINESS                                                                                  |    |  | 1  | 
|ITEM 2.       |  | PROPERTIES                                                                                |    |  | 29 | 
|ITEM 3.       |  | LEGAL PROCEEDINGS                                                                         |    |  | 29 | 
|ITEM 4.       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                   |    |  | 29 | 
|             
|PART II       |  |                                                                                           |    |  |    | 
|ITEM 5.       |  | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS                 |    |  | 29 | 
|ITEM 6.       |  | SELECTED FINANCIAL DATA                                                                   |    |  | 31 | 
|ITEM 7.       |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS |    |  | 32 | 
|ITEM 7A.      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
    MARKET RISK                             |    |  | 41 | 
|ITEM 8.       |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                               |    |  | 42 | 
|ITEM 9.       |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURES |    |  | 65 | 
|             
|PART III      |  |                                                                                           |    |  |    | 
|ITEM 10.      |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                        |    |  | 65 | 
|ITEM 11.      |  | EXECUTIVE COMPENSATION                                                                    |    |  | 65 | 
|ITEM 12.      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT                        |    |  | 65 | 
|ITEM 13.      |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                            |    |  | 66 | 
|ITEM 14.      |  | CONTROLS AND PROCEDURES                                                                   |    |  | 66 | 
|             
|PART IV       |  |                                                                                           |    |  |    | 
|ITEM 15.      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
    REPORTS ON FORM 8-K                      |    |  | 66 | 
|SIGNATURES    |  |                                                                                           | 71 | 
|EXHIBIT INDEX |  |                                                                                           | 74 | 

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PART I




Item 1.     Business

General

UTEK Corporation, a Delaware corporation, is a
non-diversified, closed-end management investment company that
has elected to be regulated as a business development company
(BDC) under the Investment Company Act of 1940
(1940 Act). As a BDC, UTEK Corporation, referred to
as the Company or we, must be primarily
engaged in the business of furnishing capital and making
available managerial assistance to companies that do not have
ready access to capital through conventional financial channels.
Such companies are termed portfolio companies.

The Company commenced operations in 1997 as UTEK
Corporation (UTEK Florida), which was incorporated
under the laws of the State of Florida in August 1996. UTEK
Florida was engaged in the business of technology transfer. On
December 31, 1998, we formed UTEK, LLC, a limited liability
company organized under the laws of the State of Florida.
Subsequent thereto, the shareholders of UTEK Florida exchanged
their shares of common stock for membership units in UTEK, LLC.
In July 1999, we formed UTEK Corporation under the laws of the
State of Delaware and in October 1999, UTEK LLC was merged into
UTEK Corporation. In September 2001, the Company acquired 100%
of PAX Technology Transfer Ltd., a United Kingdom corporation,
in a stock for stock transaction. Prior to the acquisition, PAX
had provided transfer technology services for more than twenty
years. Prior to and since our election to operate as a BDC, we
have been primarily engaged in the business of technology
transfer.

In May 2002, UTEK Corporation acquired 100% of
the outstanding common stock of Techex Acquisition Corporation
(TechEx) in a stock for stock transaction. TechEx
owned the TechEx.com website. The TechEx.com website, founded at
Yale University, is used by many technology transfer and
research professionals to exchange licensing opportunities and
innovations available for partnering.

We may seek to make additional acquisitions of
technology transfer, licensing or financial services companies
in the future. In considering whether to purchase a company, we
evaluate a number of factors including purchase price, strength
of ties and relationships with clients, universities and
research centers, the extent of intellectual property rights to
significant technologies, and amount of equity ownership in
portfolio companies which possess significant opportunity for
growth, when appropriate.

Our Internet address is www.utekcorp.com. We make
available free of charge through our website our annual report
on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports as
soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Information contained
on our website is not incorporated by reference into this Annual
Report on Form 10-K and you should not consider information
contained on our website to be part of this Annual Report on
Form 10-K.

Strategies

Our primary investment objective is to increase
our net assets by exchanging stock in our subsidiary companies
for cash and other assets that we will then use to acquire
additional technologies. We seek to achieve our investment
objective by creating subsidiaries to identify; license and
market new technologies invented primarily by employees of
universities and federal research laboratories. We intend to
merge our subsidiary companies principally into privately owned
and publicly traded companies (subsequently referred to as
portfolio companies or our investments)
in tax-free stock for stock exchanges. It is our plan that
shares of those privately-owned and publicly traded companies
received in those exchanges will, in the course of our business,
be sold for cash or other assets to permit us to invest in
additional subsidiary companies and to fund our operations. We
intend to merge our subsidiary companies into publicly traded
portfolio companies whenever possible. As of December 31,
2002, we have completed twenty-one such transactions, including
twenty mergers and one stock sale.

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Since our election to operate as a BDC, we have
concentrated our efforts on making equity investments in
portfolio companies through the manner described above. Our
initial investment in our subsidiary consists of funding to be
used to identify, research and market new technologies and for
the acquisition of licenses to those new technologies and, when
appropriate, the support of sponsored research programs to
further the development of licensed technology. We also provide
these subsidiary companies with significant managerial
assistance. After we have made an investment, we help our
subsidiary companies by researching, identifying and developing
new technologies and markets. We also assist them in acquiring
the licenses to new technologies developed at universities and
federal research laboratories. Our management provides
subsidiary companies with significant assistance in locating and
acquiring these technologies and markets for them. We then find
portfolio companies for our subsidiary companies that will
acquire the subsidiary company from us in exchange for cash,
equity or other assets. We also offer provide these portfolio
companies with significant managerial assistance with respect to
the technology the have acquired.

Our investments are concentrated in small or
development stage companies that license and develop new
technologies for commercial applications. Moreover, our
investments in portfolio companies may be concentrated in one or
more industries. In this event, we will not obtain any
advantages that may result from diversifying our portfolio
company investments among more industries. Generally, we intend
to make initial investments in our portfolio companies in
amounts sufficient to permit them to conduct initial research,
acquire technology licenses and, in some cases, to fund
additional development of new technologies and markets. Since
all of our portfolio companies are early stage companies, our
portfolio company investments do not benefit from any
diversification of risk that may result from spreading
investments among companies at various stages of development.
Furthermore, a portfolio company may spend all of the money that
we have invested without finding, acquiring or locating a new
technology or suitable market for a new technology, in which
case we would likely lose our entire investment in the portfolio
company.

We intend to take advantage of our experience in
the field of technology transfer to maximize the return on our
investments in portfolio companies. Technology transfer refers
to the process by which new technologies, developed in
universities, government research facilities, or similar
research settings, are licensed to companies for commercial
development and use. Our management and certain members of our
Board of Directors have experience in technology transfer. Our
investments in our portfolio companies are structured, through
our U2B® investment model, to allow us to take advantage of
our managements expertise. In addition, we intend to
capitalize on relationships that members of our management and
Board of Directors have developed with universities and
government research laboratories.

To facilitate establishing on-going consulting
engagements with its clients, the Company has developed a
strategic alliance process. UTEKs strategic alliances are
designed to help technology companies enhance their new product
pipeline through the acquisition of proprietary intellectual
capital from universities and federal laboratories.

We normally receive unregistered shares of common
stock from our clients as payment for the sale of our portfolio
companies and as compensation for the services we render under
our strategic alliance consulting engagements. Whenever
possible, we will seek to receive cash payments for sales of our
portfolio companies and as compensation for our services, as
well.

We may not change the nature of our business so
as to cease to be, or withdraw our election as, a BDC unless
authorized by a vote of a majority of the outstanding
voting securities, as defined in the 1940 Act, of our
shares. We do not have a registered investment adviser and our
management, under the supervision of our Board of Directors,
makes our investment and management decisions. Our investment
objectives, policies and investment diversification status may
change at any time and from time to time without stockholder
approval.

We anticipate that a substantial portion of our
investment opportunities will be presented to us as a result of
managements contacts with universities, research
laboratories and in private industry.

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Our Investment Model

Our investments generally follow a specific
series of steps, which our management believes provide the
greatest opportunity for long-term appreciation of our assets.
As our investments are designed to bring and develop
technologies from their inception at universities to the private
sector, we refer to our investment model as
U2B®. Using our U2B® investment model, we
create and capitalize subsidiary companies to acquire new
technologies and eventually exchange the securities of our
subsidiaries for securities in companies that acquire them. The
following is a list of the steps that we generally take when we
make an investment in a portfolio company using our investment
model:



| |                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Evaluate potential technology growth
    fields.                                                                                                                                        
|
| | 2. Form and capitalize a subsidiary company
    to acquire new technologies.                                                                                                               
|
| | 3. Assist the subsidiary company in the
    identification and evaluation of new technologies and markets
    that offer significant opportunity for growth.                               
|
| | 4. When appropriate, advise and assist the
    subsidiary company in negotiating a sponsored research agreement
    to further develop the technology.                                     
|
| | 5. Identify and contact potential portfolio
    companies to merge with the subsidiary company.                                                                                            
|
| | 6. Advise and assist the subsidiary company
    in completing the technology transfer with the research
    institution and acquiring the license to the technology.                       
|
| | 7. Complete the sale of 100% of the
    subsidiary company to the portfolio company and receive
    compensation for the sale of the stock we hold in the portfolio
    company.           
|
| | 8. Sell any securities received from the
    portfolio company as payment for the subsidiary company and use
    the proceeds to make additional investments or to fund our
    operations.

Investment Evaluation Process

New technology opportunities may come to our
attention from many sources. The primary sources to date have
been from our managements contacts with universities and
the private sector. We believe that the ability of our
management to maintain and develop relationships with university
and research laboratories is a key factor in our ability to
identify new potential investment opportunities.

Prior to the Company committing funds to an
investment opportunity, we will assist the subsidiary and
portfolio company by conducting research regarding the prospects
and risks of the potential investment. Our Scientific Advisory
Council (discussed below) and managements experience is
helpful in evaluating:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | new technologies,                                                                                          
|
| |  | products,                                                                                                  
|
| |  | markets,                                                                                                   
|
| |  | industry trends,                                                                                           
|
| |  | financial requirements,                                                                                    
|
| |  | competition, and                                                                                           
|
| |  | the operating record and quality of the
    entrepreneurial group associated with a prospective investment.

Although our management has scientific and
professional experience, they may have limited or no experience
in the specific areas of business in which our portfolio
companies operate.

Strategic Alliances With Client
Companies

To establish on-going consulting engagements with
its clients, we have developed a strategic alliance process.
UTEKs strategic alliances are designed to help technology
companies rapidly enhance their new

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product pipeline through the acquisition of
proprietary intellectual capital from universities and federal
laboratories.


This process usually includes performing the
following activities:



| |   |                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Constructing a technology acquisition or
    disposition profile that is approved by the client.                                                                                                                                                                                                                    
|
| |  | When appropriate, acquiring and reviewing new
    technology acquisition opportunities from leading university and
    federal laboratory research centers that potentially meet this
    profile.                                                                                                                  
|
| |  | When a client has expressed an interest in
    learning more about a specific technology acquisition
    opportunity, UTEK will acquire additional information about the
    technology and share it with the client.                                                                                               
|
| |  | At our clients request, UTEK will negotiate
    licenses to acquire technologies.                                                                                                                                                                                                                                  
|
| |  | On a case-by-case basis, when both UTEK and our
    client agree to move forward to acquire a specific technology,
    UTEK will propose an equity-financing plan for the technology
    acquisition. Alternatively, our clients may acquire UTEK
    introduced technology directly from the research institutions.

In addition, we intend to enter into strategic
alliance agreements with universities and private research
organizations for the purpose of marketing various technologies
developed by these entities.

Investments in Portfolio Companies

Our initial investments will be made in
transactions that will normally be negotiated directly by our
management, with the portfolio company or an affiliate of the
portfolio company. In all prior and most future instances, we
have executed or will execute our investments in portfolio
companies through the creation and capitalization of a
subsidiary to acquire a new technology, which subsidiary will
then be merged with a portfolio company. In connection with such
transaction, we receive shares of common stock in the portfolio
company for the securities of our subsidiary company. In
addition to holding a license to a new technology, our
subsidiary company may also hold cash and other assets. Our
management will seek to structure the terms of the investment so
as to provide for the capital needs and success of the portfolio
company and at the same time to maximize our opportunity for
long-term capital appreciation.

We intend to limit our total cash investments in
any individual portfolio company to the lesser of $500,000 or an
amount equal to ten percent of our net assets at the time of
investment. To date, our initial investments in portfolio
companies have been significantly less than $500,000. By
limiting the size of our total investment in any one portfolio
company, we hope to reduce and diversify our risks. In exchange
for our investment, we will receive shares of common stock in
the portfolio company. To date, all of our portfolio company
securities have been common stock and warrants to purchase
common stock, and we anticipate that we will continue to acquire
common stock in portfolio companies. Use of the funds that we
provide to portfolio companies will be restricted to obtaining
licenses to new technologies and developing and marketing those
technologies.

Identifying New Technologies

We have developed relationships with a number of
universities and research centers in the United States and
Europe. In order to provide us early access to new technologies,
or to acquire or develop specific technologies, we have entered
into alliances, licensing, license option agreements and/or
sponsored research agreements with the following institutions:



| |                                                   
| | --------------------------------------------------
| | Agreement with the University of South
    Florida

In January 1998, we entered into an agreement
with the University of South Florida pursuant to which we have
agreed to review and evaluate the commercial potential of
certain new technologies developed at the university that are
presented to us. In return, we have the ability, if we and the
university deem it appropriate, to enter into license option
agreements with the university providing us with the exclusive
right to seek a

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licensee or other commercial opportunity for the
technology, provided mutually agreeable terms are reached, for a
limited period of time. We have reviewed and negotiated licenses
with the University of South Florida on the following
technologies:




| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | a new diagnostic test for colon, testicular and
    ovarian cancer,                                                          
|
| |  | a new software technology for digitally coloring
    MRIs to facilitate their reading and the rendering of diagnoses,
    and
|
| |  | a new technique to identify cryptosporidium (a
    water-borne parasite) in water.                                           

The term of the original agreement was for three
years. On February 15, 2001, the agreement was extended for
an additional three years, but may be terminated by either party
on 60 days written notice.



| |                                             
| | --------------------------------------------
| | Agreement with the University of
    Memphis

In May 1998, we entered into an agreement with
the University of Memphis pursuant to which we have agreed to
evaluate the commercial potential of select technologies
developed at the university that are presented to us for review.
The university has agreed that upon our request, it will file
patents to protect technologies that we wish to have protected.
In addition, under the agreement, the university may grant to us
license option agreements which will give us the exclusive
rights to license a particular technology, provided mutually
agreeable terms are reached, for a period of 12 months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                            
| | -------------------------------------------
| | Agreement with Johns Hopkins
    University

In June 1999, we entered into an agreement with
Johns Hopkins University pursuant to which we have agreed to
evaluate the commercial potential of certain technologies
developed at the university that are presented to us for review.
The university has agreed that upon our request, it will file
patents to protect technologies that we wish to have protected.
In addition, under the agreement, the university may grant to us
license option agreements which will give us the exclusive
rights to license the technology, provided mutually agreeable
terms are reached, for a period of 12 months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                             
| | --------------------------------------------
| | Agreement with the University of
    Florida

In October 1999, we entered into an agreement
with the University of Florida pursuant to which we have agreed
to evaluate the commercial potential of certain technologies
developed at the university that are presented to us for
evaluation. Under the agreement, the university may grant us
license option agreements which will give us the exclusive
rights to license the technology, provided mutually agreeable
terms are reached, for a period of 12 months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Agreement with Fraunhofer Institute of Germany
    for Interfacial Engineering and Biotechnology IGB

In November 1999, we entered into a strategic
alliance with Fraunhofer Institute pursuant to which we have
agreed to review certain technologies developed at Fraunhofer to
gauge the potential for successful commercialization in the
United States. Pursuant to the agreement, Fraunhofer may grant
to us a 12-month, exclusive, royalty-free license option for the
technologies reviewed, if we so request. We may then license
these technologies, provided mutually agreeable terms are
reached.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.

5



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| |                                                         
| | --------------------------------------------------------
| | Agreement with Virginia Tech Intellectual
    Properties

In December 1999, we entered into an agreement
with Virginia Tech Intellectual Properties pursuant to which we
have agreed to evaluate the commercial potential of certain
technologies developed at Virginia Tech Intellectual Properties
that are presented to us for evaluation. Under the agreement,
Virginia Tech Intellectual Properties may grant us license
option agreements which will give us the exclusive rights to
license the technology, provided mutually agreeable terms are
reached, for a period of 12 months.

The term of the agreement is five years, but may
be terminated by either party on 30 days written notice.



| |                                                                
| | ---------------------------------------------------------------
| | Agreement with Florida State University
    Research Foundation

In December 1999, we entered into an agreement
with Florida State University Research Foundation to review
certain technologies developed at the Research Foundation to
gauge their potential for successful commercialization. Under
the agreement, the Research Foundation may grant us a 12-month
exclusive, royalty-free license option agreement for these
technologies. We may then license these technologies, provided
mutually agreeable terms are reached, for a period of
12 months.

The term of the agreement is five years but may
be terminated by either party on 60 days written notice.



| |                                                   
| | --------------------------------------------------
| | Agreement with Florida Institute of
    Technology

In March 2000, we entered into an agreement with
Florida Institute of Technology to review certain technologies
developed at Florida Institute of Technology to gauge their
potential for successful commercialization. Under the agreement,
Florida Institute of Technology may grant us a 12-month
exclusive, royalty-free license option agreement for these
technologies. We may then license these technologies, provided
mutually agreeable terms are reached, for a period of 12 months.

The term of the agreement is five years but may
be terminated by either party on 60 days written notice.



| |                        
| | -----------------------
| | Agreement with Sopartec

In May 2000, we entered into an agreement with
Sopartec of Louvain-la-Neuve, to review certain technologies
developed at the Universite Catholique de Louvain, a university
located in Belgium, to gauge their potential for successful
commercialization in the United States. Under the agreement,
either the Universite or Sopartec may grant us exclusive
12-month options to license certain technologies, provided
mutually agreeable terms are reached.

The term of the agreement is for five years but
may be terminated by either party on 60 days written notice.



| |                                 
| | --------------------------------
| | Agreement with Auburn University

In June 2000, we entered into an agreement with
Auburn University to review certain technologies developed at
Auburn to gauge their potential for successful
commercialization. Under the agreement, Auburn may grant us an
exclusive, 12-month royalty-free license option agreement for
these technologies.

The term of the agreement is five years but may
be terminated by either party on 60 days written notice.



| |                                                      
| | -----------------------------------------------------
| | Agreement with California Institute of
    Technology

In March 2000, we entered into a license
agreement with California Institute of Technology (also known as
Caltech) for their new software technology designed to produce
human likenesses that should be able to simulate conversations
for e-commerce applications. We merged our portfolio company
Digital Personnel, Inc., which held this license, with Graphco
Technologies Inc. in March 2000. For a detailed discussion of
this transaction, see Business  Identifying
Acquisition Candidates.

6



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| |                                 
| | --------------------------------
| | Agreement with Dartmouth College

In December 2000, we entered into an agreement
with Dartmouth College to review its selected intellectual
properties and/or new invention disclosures to gauge their
potential for successful commercialization. Under the agreement,
Dartmouth College may grant us a 12-month exclusive,
royalty-free license option agreement for these technologies.

The term of the agreement is for five years but
may be terminated by either party on 60 days written notice.

In addition, we have acquired two licenses to a
new deicing technology developed at Dartmouth College. We merged
our portfolio companies Ice Surface Development, Inc. and
Technology Development, Inc., which held these licenses in
November 2000 and February 2001, respectively. For a detailed
discussion of this transaction, see Business 
Identifying Acquisition Candidates.



| |                                  
| | ---------------------------------
| | Agreement with Cornell University

In May 1999, we entered into a license agreement
with Cornell University for their carbon fiber reinforcing bar
technology. In addition, we funded a sponsored research project
at Cornell to further test the technology. We merged our
portfolio company Advanced Reinforcing Sciences, Inc., which
held this license, with NuBar, Inc in May 1999. For a detailed
discussion of this transaction, see Business 
Identifying Acquisition Candidates.



| |                                                    
| | ---------------------------------------------------
| | Agreement with Florida International
    University

In August 2001, we entered into an agreement with
Florida International University to review certain technologies
developed at Florida International University to gauge their
potential for successful commercialization. Under the agreement,
the Florida International University may grant us a 12-month
exclusive, royalty-free license option agreement for these
technologies. We may then license these technologies, provided
mutually agreeable terms are reached, for a period of
12 months.

The term of the agreement is five years, but may
be terminated by either party on 30 days written notice.



| |                                  
| | ---------------------------------
| | Agreement with Rutgers University

In December 2001, we entered into an agreement
with Rutgers University pursuant to which we have agreed to
evaluate the commercial potential of certain technologies
developed at the university that are presented to us for
evaluation. The university has agreed that upon our request, it
will file patents to protect technologies that we wish to have
protected. In addition, under the agreement, the university may
grant to us license option agreements which will give us the
exclusive rights to license the technology, provided mutually
agreeable terms are reached, for a period of 3 months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                   
| | ----------------------------------
| | Agreement with University of Akron

In August 2001, we entered into an agreement with
the University of Akron pursuant to which we have agreed to
evaluate the commercial potential of certain technologies
developed at the university that are presented to us for
evaluation. The university has agreed that upon our request, it
will file patents to protect technologies that we wish to have
protected. In addition, under the agreement, the university may
grant to us license option agreements which will give us the
exclusive rights to license the technology, provided mutually
agreeable terms are reached, for a period of 6 months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.

7



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| |                                    
| | -----------------------------------
| | Agreement with University of Hawaii

In May 2001, we entered into an agreement with
the University of Hawaii pursuant to which we have agreed to
evaluate the commercial potential of certain technologies
developed at the university that are presented to us for
evaluation. The university has agreed that upon our request, it
will file patents to protect technologies that we wish to have
protected. In addition, under the agreement, the university may
grant to us license option agreements which will give us the
exclusive rights to license the technology, provided mutually
agreeable terms are reached.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                          
| | -----------------------------------------
| | Agreement with University of
    Maryland

In January 2000, we entered into a license
agreement with the University of Maryland for a lung cancer
diagnostic technology. In addition, we funded a sponsored
research project at the university to further test the
technology. We sold our portfolio company Cancer Diagnostics,
Inc., which held this license, to Lexon, Inc. in January 2000.
For a detailed discussion of this transaction, see
Business  Identifying Acquisition
Candidates.



| |                                          
| | -----------------------------------------
| | Agreement with University of
    Missouri

In September 2001, we entered into a license
agreement with the University of Missouri for a new technology,
which allows for the encapsulation of a variety of substances at
low temperatures. We merged our portfolio company Advanced
Microsphere Technology, Inc., which contained this license, with
Prime Pharmaceutical Corporation in September 2001. For a
detailed discussion of this transaction, see
Business  Identifying Acquisition
Candidates.



| |                                   
| | ----------------------------------
| | Agreement with University of Miami

In April 2001, we entered into an agreement with
the University of Miami to review certain technologies developed
at the University of Miami to gauge their potential for
successful commercialization. Under the agreement, the
University of Miami may grant us a 9-month exclusive,
royalty-free license option agreement for these technologies. We
may then license these technologies, provided mutually agreeable
terms are reached, for a period of 9-months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.

In addition, in April 2001, we entered into a
license agreement with the University of Miami for a new
technology for masking an Auxiliary Channel in the phase of
Spectrum of Stereo Audio. We merged our portfolio company
Watermark Technologies, Inc., which held this license, with
Stealth MediaLabs, Inc. (formerly BitzMart, Inc.) in April 2001.
For a detailed discussion of this transaction, see
Business  Identifying Acquisition
Candidates.



| |                                               
| | ----------------------------------------------
| | Agreement with University of South
    Alabama

In May 2000, we entered into a license agreement
with the University of South Alabama to acquire a process for
converting crumb rubber into commodity chemicals. We sold our
Advanced Recycling Sciences portfolio company, which held this
license, to the Quantum Group, Inc in May 2000. Subsequently,
the Quantum Group changed its name to Advanced Recycling
Sciences, Inc.



| |                                     
| | ------------------------------------
| | Agreement with University of Warwick

In January 2002, we entered into an agreement
with the University of Warwick, a university located in England,
to review certain technologies developed at the University of
Warwick to gauge their potential for successful
commercialization. Under the agreement, the University of
Warwick may grant us a 90-day exclusive, royalty-free license
option agreement for these technologies. We may then license
these technologies, provided mutually agreeable terms are
reached, for a period of 90-days.

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The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                              
| | ---------------------------------------------
| | Agreement with University of West
    Florida

In March 2001, we entered into an agreement with
the University of West Florida to review certain technologies
developed at the University of West Florida to gauge their
potential for successful commercialization. Under the agreement,
the University of West Florida may grant us a 12-month
exclusive, royalty-free license option agreement for these
technologies. We may then license these technologies, provided
mutually agreeable terms are reached, for a period of 12-months.

The term of the agreement is five years, but may
be terminated by either party on 30 days written notice.



| |                                              
| | ---------------------------------------------
| | Agreement with University of
    Loughborough

In February 2002, we entered into an agreement
with the University of Loughborough to review certain
technologies developed at the University of Loughborough to
gauge their potential for successful commercialization. Under
the agreement, the University of Loughborough may grant us a
90-day exclusive, royalty-free license option agreement for
these technologies. We may then license these technologies,
provided mutually agreeable terms are reached, for a period of
90-days.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                             
| | --------------------------------------------
| | Agreement with Oklahoma State
    University

In April 2002, we entered into an agreement with
the Oklahoma State University to review certain technologies
developed at the Oklahoma State University to gauge their
potential for successful commercialization. Under the agreement,
the Oklahoma State University may grant us a limited time period
term exclusive, royalty-free license option agreement for these
technologies. We may then license these technologies, provided
mutually agreeable terms are reached, during the limited time
period.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                               
| | ----------------------------------------------
| | Agreement with Florida Atlantic
    University

In April 2002, we entered into an agreement with
the Florida Atlantic University to review certain technologies
developed at the Florida Atlantic University to gauge their
potential for successful commercialization. Under the agreement,
the Florida Atlantic University may grant us a 9-month
exclusive, royalty-free license option agreement for these
technologies. We may then license these technologies, provided
mutually agreeable terms are reached, for a period of 9-months.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                                           
| | ----------------------------------------------------------
| | Agreement with Nauka Scientific and Industrial
    Concern

In May 2002, we entered into an agreement with
the Nauka Scientific and Alliance Concern to review certain
technologies developed at the Nauka Scientific and Alliance
Concern to gauge their potential for successful
commercialization. Under the agreement, the Nauka Scientific and
Alliance Concern may grant us a 180-day exclusive, royalty-free
license option agreement for these technologies. We may then
license these technologies, provided mutually agreeable terms
are reached, for a period of 180-days.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                           
| | ------------------------------------------
| | Agreement with University of
    Rochester

In July 2002, we entered into an agreement with
the University of Rochester to review certain technologies
developed at the University of Rochester to gauge their
potential for successful commercialization. Under the agreement,
the University of Rochester may grant us a 90-day exclusive,
royalty-free license

9



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##### Table of Contents



option agreement for these technologies. We may
then license these technologies, provided mutually agreeable
terms are reached, for a period of 90-days.


The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                  
| | ---------------------------------
| | Agreement with University of York

In August 2002, we entered into an agreement with
the University of York to review certain technologies developed
at the University of York to gauge their potential for
successful commercialization. Under the agreement, the
University of York may grant us a 90-day exclusive, royalty-free
license option agreement for these technologies. We may then
license these technologies, provided mutually agreeable terms
are reached, for a period of 90-days.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.



| |                                             
| | --------------------------------------------
| | Agreement with The Interactive
    Institute

In October 2002, we entered into an agreement
with The Interactive Institute to review certain technologies
developed at The Interactive Institute to gauge their potential
for successful commercialization. Under the agreement, The
Interactive Institute may grant us a 90-day exclusive,
royalty-free license option agreement for these technologies. We
may then license these technologies, provided mutually agreeable
terms are reached, for a period of 90-days.

The term of the agreement is five years, but may
be terminated by either party on 60 days written notice.

Evaluation and Acquisition of
Technology

With few exceptions, all technologies developed
by university faculty are the property of the universities and
are licensed by the universitys research foundations or
similar organizations to our portfolio companies for
commercialization. To help facilitate the identification of and
access to new technology, we have created a Scientific Advisory
Council to review technologies developed at universities and
laboratories.

When we assist a portfolio company to evaluate a
new technology, we review the technology to make sure that it
meets four criteria:



| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | the technology should represent a significant
    advance over existing technologies;                          
|
| |  | there should be an existing global market for the
    technology once it is commercialized;                    
|
| |  | the technology should be socially responsible
    (i.e., not intended for destructive or harmful purposes); and
|
| |  | there should be a customer readily available for
    the technology.                                           

If, in our managements view, a technology
meets these criteria, then we will assist the portfolio company
in commencing negotiations with the technology developer to
arrange for a license. Normally, we seek to acquire on behalf of
our portfolio companies a worldwide exclusive license for the
field of use. These licenses usually have an upfront fee,
royalty provision, and minimum annual royalties. Pursuant to the
terms of our license agreements, all rights to royalties remain
with the university or research institute that grants the
license. The term for most agreements is for the life of the
intellectual property underlying the license. Our management
will review license agreements and advise portfolio companies as
to license terms and requirements. In addition, when we require
assistance in evaluating a technology, our management will have
the technology reviewed by members of our Scientific Advisory
Council or other individuals we may deem appropriate.

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Scientific Advisory Council

Dr. Stuart Brooks, serving on our board of
directors, serves as the Board Liaison to the Scientific
Advisory Council. During 2002 our Scientific Advisory Council
consisted of the following members:

|                              |  |                                                                                          |  |                                                                                          
|----------------------------- |  | ---------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------
|Name                          |  | Title                                                                                    |  | Expertise                                                                                
|                              |  |                                                                                          |  |                                                                                          
|Albert J. Anthony, D.M.D.     |  | Retired                                                                                  |  | Dentistry and dental equipment.                                                          
|                             
|Jeffrey Bleil, Ph.D.          |  | Director of Research, Zygam, Inc.                                                        |  | Cell and developmental biology.                                                          
|                             
|Alain M. Boudet, Ph.D.        |  | Professor, University of Paul Sabatier                                                   |  | Cell and molecular plant biology.                                                        
|                             
|Russell Brantman, Ph.D.       |  | Engineering Technology Consultant                                                        |  | Mechanical engineering/ Systems
    Engineering/Vehicle safety systems/Crash simulations.
|                             
|Marcel J. Crochet, Ph.D.      |  | Recteur, Université Catholique de Louvain
    Louvain-la-Nueve, Belgium                  |  | Fluid mechanics.                                                                         
|                             
|Tzann T. Fang, M.D.           |  | Physician, Bakersfield                                                                   |  | Hematology/Medical oncology.                                                             
|                             
|S. Anders Flodström, Ph.D.    |  | President, Kungl Tekniska Högskolan Royal
    Institute of Technology, Stockholm, Sweden |  | Solid state and semiconductor physics.                                                   
|                             
|Jui-Sung Hung, M.D., F.A.C.C. |  | Professor, China Medical College Hospital                                                |  | Cardiology                                                                               
|                             
|Walter Kohn, Ph.D.            |  | Professor, University of California at Santa
    Barbara                                 |  | Chemistry                                                                                
|                             
|Gerald Krueger, Ph.D., CPE    |  | Principal Scientist/Ergonomist, Col. U.S. Army
    (retired)                             |  | Human performance enhancement/Human systems
    design.                                  
|                             
|Yun-Fan Liaw, M.D.            |  | Professor of Medicine, Chang Gung Medical College                                        |  | Gastroenterology/hepatology.                                                             
|                             
|Sharrell L. Mikesell Ph.D.    |  | Executive Director, Ohio Polymer Strategy Council                                        |  | Polymer Sciences                                                                         
|                             
|O. Norman Nesheim, Ph.D.      |  | Professor, University of Florida                                                         |  | Pesticide regulation and safety management/Food
    and water safety with pesticide use. 
|                             
|Charles Proctor, Ph.D., P.E.  |  | Proctor Engineering Research & Consulting                                                |  | Orthopedic implants and devices.                                                         
|                             
|Peter Reischl, Ph.D.          |  | Professor, San Jose State University                                                     |  | Electrical engineering/ High                                                             
|                              |  |                                                                                          |  | frequency energy conversion.                                                             
|                             
|Brian B. Schwartz, Ph.D.      |  | Professor, Graduate School of the City University
    of New York                        |  | Physics and material science.                                                            
|                             
|Eugene Starr, Ph.D.           |  | Independent Consultant                                                                   |  | Engineering physics                                                                      
|                             
|Michael Zaworotko, Ph.D.      |  | Professor, University of South Florida                                                   |  | Nanotechnology/Crystal engineering/X-ray
    crystallography.                            

Subsidiary Companies

As of December 31, 2002, each of our
investments in our subsidiary companies represents less than 5%
of our total assets. We have controlling interests in each of
our subsidiary companies and members of our management also
serve as officers and directors of each subsidiary. The
principal place of business of each

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subsidiary company is located at our executive
offices at 202 South Wheeler Street, Plant City, Florida. In
addition to our investment, we provide our subsidiary companies
with managerial assistance in completing technology transfers.
We have not made loans to any of our subsidiaries. We have
executed or will likely execute our investments in portfolio
companies through the creation and capitalization of a
subsidiary company to acquire a new technology, which subsidiary
company will then be merged with a portfolio company. In
connection with such transaction, we receive shares of common
stock in the portfolio company for the securities of our
subsidiary company. In addition to holding a license to a new
technology, our subsidiary company may also hold cash and other
assets.


The following is a list of our subsidiary
companies as of December 31, 2002, with a brief description
of their business:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ocular Technologies, Inc.(formerly Advanced Desalination
    Technologies, Inc.) is a company that is seeking to acquire
    medical diagnostic technologies. We own 100% of the common stock
    of Ocular Technologies, Inc. We have invested $300 in Ocular
    Technologies, Inc. as of December 31, 2002. Sam Reiber, our
    vice president and general counsel, is the sole director and
    president of Ocular Technologies, Inc.                                                                                                                                                                                 
|
| | UTEK Real Estate Holdings, Inc.(formerly Doppler Tomography
    International, Inc.) is a company that is to hold future
    real estate assets for the Company. The Company, through UTEK
    Real Estate Holdings, Inc., may purchase an office facility for
    its principal executive office and/or for investment. We own
    100% of the common stock of UTEK Real Estate Holdings, Inc. We
    have invested $900 in UTEK Real Estate Holdings, Inc. as of
    December 31, 2002. Sam Reiber, our vice president and
    general counsel, is the sole director and president of UTEK Real
    Estate Holdings, Inc.
|
| | Advanced Sensor Technologies, Inc.(formerly Composite Springs
    Technologies, Inc.) is a company that is currently seeking
    to acquire licenses to new nano science technologies. We own
    100% of the common stock of Advanced Sensor Technologies, Inc.
    We have invested $1,002 in Advanced Sensor Technologies, Inc. as
    of December 31, 2002. Sam Reiber, our vice president and
    general counsel, is the sole director and president of Advanced
    Sensor Technologies, Inc.                                                                                                                       

Identifying Acquisition Candidates

In order to realize a return on our investments
in our subsidiary companies, we must sell our subsidiary
companies or the technology and development rights they hold.
Based on current federal tax law and industry conditions, it is
our policy to sell our subsidiary companies to companies in
merger transactions where we receive shares in the acquiring
company in a federal tax-free exchange for all of our shares in
our subsidiary company. In this manner, all rights to
technologies held by our subsidiary company transfer to the
acquirer, and the acquirer assumes all obligations under the
license agreement and sponsored research agreement if present.
Our merger transactions to date have been with thinly traded
public companies and private companies whose common stock is not
publicly traded. As a result of merger transactions, the Company
holds shares in thinly traded public companies, including Lexon,
Inc., Advanced Recycling Sciences, Inc., Clean Water
Technologies, Inc., Sense Holdings, Inc., Stealth MediaLabs,
Inc., Palladium Communications, Inc., Group Management
Corporation, Circle Group Holdings, Inc., Voice and Wireless
Corporation, FullCircle Registry, Inc., Innovative Medical
Services, Inc. and Centrex Inc. As of December 31, 2002,
all of the securities that we have received in exchange for our
subsidiary companies are restricted securities, as
that term is defined under Rule 144. These securities may
not be sold in the absence of registration under the Securities
Act of 1933 or an exemption therefrom. As a result, our ability
to sell or otherwise transfer the securities we hold will be
limited. Our management and staff have primary responsibility
for locating suitable merger partners.

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Technology transfer transactions that we have
completed from inception to December 31, 2002, include the
following:

Gentest,
Inc./Lexon, Inc.

In May 1998, Gentest, Inc. our subsidiary
company, merged with Lexon, Inc., a development stage Oklahoma
corporation. In connection with the merger, we received
1,000,000 unregistered shares of Lexon common stock and Lexon
acquired ownership of Gentest, Inc., which had acquired the
exclusive license to develop, manufacture and market a blood
test that will potentially allow for the early screening of
colon cancer and certain types of ovarian and testicular
cancers. Lexon is developing this blood test for general
laboratory use. The prototype blood test kit requires additional
evaluation and testing and cannot be sold in the United States.
The blood test kit requires FDA approval before it can be sold
in the United States. Lexon is a public development stage
company with shares traded on the over-the-counter bulletin
board under the symbol LXXN. As of December 31, 2002, we
owned 236,000 shares of Lexon common stock, which represents
approximately 1.4% of the issued and outstanding common stock of
Lexon, Inc.

Image Analysis
Corporation/Image Analysis, Inc.

In January 1999, Image Analysis Corporation, our
subsidiary company, merged with Image Analysis, Inc., a
development stage Oklahoma corporation. In connection with the
merger, we received 879,300 unregistered shares of common stock
of Image Analysis, Inc. As a result of the merger, Image
Analysis, Inc. holds the exclusive license, patented in the
United States and other countries, to a new technology for
producing color magnetic resonance images, or MRI, from existing
MRI scanners. Image Analysis, Inc. is currently funding research
and development of this new technology. The research is being
conducted at Brenau University in Georgia under the direction of
Dr. Keith Brown, the inventor of the technology. Image
Analysis, Inc. is a privately held company. As a result of two
transactions with Image Analysis, Inc., we owned 1,344,300
shares of common stock of Image Analysis, Inc. as of
December 31, 2002, which represents approximately 15.6% of
the issued and outstanding common stock of Image Analysis, Inc

E. Coli
Measurement Systems, Inc./Centrex, Inc.

In May 1999, E. Coli Measurement Systems, Inc.,
our subsidiary company, merged with Centrex, Inc., a development
stage Oklahoma corporation. In connection with the merger, we
received 900,000 unregistered shares of Centrex, Inc. common
stock. As a result of this acquisition Centrex has acquired the
exclusive license to a new technology for the detection of E.
Coli bacteria in food and water. In July 1999, E. Coli
Measurement Systems, Inc. entered into a licensing and sponsored
research agreement with the University of California regarding
an E. Coli detection technology. The technology was developed at
the Los Alamos National Laboratory and may be useful for the
rapid detection of E. Coli in food and water. Centrex, Inc. is a
public development stage company with shares traded on the
over-the-counter bulletin board under the symbol CNEX. As a
result of two transactions with Centrex, Inc., we owned
1,343,400 shares of Centrex common stock at December 31,
2002, which represents approximately 7.7% of the issued and
outstanding common stock of Centrex, Inc.

Advanced
Reinforcing Technologies, Inc./Nubar, Inc.

In May 1999, Advanced Reinforcing Technologies,
Inc., our subsidiary company, merged with Nubar, Inc., a
development stage Oklahoma corporation (formerly Nucor
Enterprises, Inc.). In connection with the merger, we received
900,000 unregistered shares of common stock of Nubar, Inc.
Nubar, Inc. is involved with the development of new materials
for rebuilding and enhancing the infrastructure of roads and
bridges. Pursuant to the merger, Nubar, Inc. acquired the
exclusive license for a new carbon fiber composite rebar
building technology developed at Cornell University. In
addition, Advanced Reinforcing Technologies established a
sponsored research program for further development of its
technology. Nubar, Inc. is a privately held company. As of
December 31, 20021, we owned 900,000 shares of common stock
of Nubar, Inc., which represents approximately 12.8% of the
issued and outstanding common stock of Nubar, Inc.

13



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Clean Water
Technologies, Inc./Clean Water Technologies, Inc. (formerly
NuElectric Corporation.)

In June 1999, our subsidiary company Clean Water
Technologies, Inc., merged with Clean Water Technologies, Inc.,
a development stage Delaware corporation. Clean Water
Technologies, Inc. is in the business of acquiring, developing
and marketing new technologies for conserving energy and
protecting the environment. In connection with the merger, we
received 791,957 unregistered shares of Clean Water
Technologies, Inc. common stock. As a result of the merger,
Clean Water Technologies, Inc acquired the exclusive license to
a new technology for removing arsenic from water. Clean Water
Technologies, Inc. is a public development stage company with
shares traded on the over-the-counter bulletin board under the
symbol CWTI. As a result of two transactions and net of sales of
Clean Water Technologies, Inc. shares, we owned 980,778 shares
of Clean Water Technologies, Inc. common stock as of
December 31, 2002, which represents approximately 17.2% of
the issued and outstanding common stock of Clean Water
Technologies, Inc.

Safe Water
Technologies, Inc./Centrex, Inc.

In September 1999, Safe Water Technologies, Inc.,
our subsidiary company, merged with Centrex, Inc., a development
stage Oklahoma corporation. In connection with the merger, we
received 684,000 unregistered shares of Centrex, Inc. common
stock. As a result of the merger, Centrex holds an exclusive
license to a new technology developed at the University of South
Florida for the automated detection of Cryptosporidium and
Giardia in water. Centrex, Inc. is a public development stage
company with shares traded on the over-the-counter bulletin
board under the symbol CNEX. As a result of two transactions, we
owned 1,343,400 shares of Centrex common stock at
December 31, 2002, which represents approximately 7.7% of
the issued and outstanding common stock of Centrex, Inc.

Cancer
Diagnostics, Inc./Lexon, Inc.

In January 2000, Lexon, Inc. purchased all of the
issued and outstanding stock of Cancer Diagnostics, Inc., one of
our subsidiary companies, for $200,000. Under the terms of the
stock purchase agreement, we have received $170,000 from Lexon,
Inc. However, Lexon, Inc. was not able to pay us the remaining
cash balance as required by the stock purchase agreement. We
received 236,000 shares of Lexon, Inc. common stock for payment
in full of the outstanding balance plus interest in 2001.

Digital
Personnel, Inc./Graphco-DPI Holding Company

In March 2000, Digital Personnel, Inc., our
subsidiary company, merged with Graphco-DPI Holding Company, a
wholly-owned subsidiary company of Graphco Technologies, Inc., a
development stage New Jersey corporation. In connection with the
merger, we received 100,799 unregistered shares of common stock
of Graphco Technologies, Inc. Graphco Technologies, Inc. is
involved with the development of personal identification
technology and software solutions for computer aided maintenance
and support. As a result of the merger, Graphco Technologies,
Inc. acquired the exclusive worldwide license to technology for
new software designed to produce human likenesses that should be
able to simulate conversation for e-commerce applications.
Graphco Technologies, Inc. is a privately held company. As of
December 31, 2002, we owned 100,799 shares of common stock
of Graphco Technologies, Inc., which represents approximately
0.6% of the issued and outstanding common stock of Graphco
Technologies, Inc.

Advanced
Recycling Sciences, Inc./Advanced Recycling Sciences,
Inc.(formerly The Quantum Group, Inc.)

In June 2000, Advanced Recycling Sciences, Inc.,
our subsidiary company, merged with Advanced Recycling Sciences,
Inc., a Nevada corporation. In connection with the merger, we
received 931,000 unregistered shares of common stock of Advanced
Recycling Sciences, Inc. Advanced Recycling Sciences, Inc. is a
public development stage company with shares traded on the
over-the-counter bulletin board under the symbol ARYC. Advanced
Recycling Sciences, Inc. provides technology for recycling
vehicular tires. As a result of the merger, Advanced Recycling
Sciences, Inc. acquired the worldwide license to a technology
for a

14



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##### Table of Contents



method of reclamation of scrap-vulcanized rubber
using supercritical fluids. As a result of two transactions and
net of sales of Advanced Recycling Sciences, Inc. shares, we
owned 2,103,053 shares of common stock of Advanced Recycling
Sciences, Inc. as of December 31, 2002, which represents
approximately 9.4% of the total issued and outstanding common
stock of Advanced Recycling Sciences, Inc.


Zorax,
Inc./Clean Water Technologies, Inc. (formerly NuElectric
Corporation.)

In September 2000, our subsidiary company Zorax,
Inc. merged with Clean Water Technologies, Inc., a Delaware
corporation. Clean Water Technologies, Inc. is in the business
of acquiring, developing and marketing new technologies for
conserving energy and protecting the environment. In connection
with the merger, we received 546,000 unregistered shares of
Clean Water Technologies, Inc. common stock. As a result of the
merger, Clean Water Technologies, Inc. acquired an exclusive
license to a technology for the separation of cystic parasitic
forms from water. Clean Water Technologies, Inc. is a public
development stage company with shares traded on the
over-the-counter bulletin board under the symbol CWTI. As a
result of two transactions and net of sales of Clean Water
Technologies, Inc. shares, we owned 980,778 shares of Clean
Water Technologies, Inc. common stock as of December 31,
2002, which represents approximately 17.2% of the issued and
outstanding common stock of Clean Water Technologies, Inc.

Ice Surface
Development, Inc./Torvec, Inc.

In November 2000, Ice Surface Development, Inc.,
our subsidiary company, merged with Torvec, Inc., a New York
corporation. Torvec, Inc., is a public development stage company
with shares traded on the over-the-counter bulletin board under
the symbol TOVC. In connection with the merger, we received
1,068,354 unregistered shares of common stock of Torvec, Inc.
Torvec, Inc. is a developer of highly advanced automotive
technologies. As a result of the merger, Torvec, Inc. acquired
the exclusive worldwide license to a technology that acts as an
electronic system for modifying ice adhesion. As of
December 31, 2002, we owned no shares of common stock of
Torvec, Inc due to our sale of our entire holdings of Torvec,
Inc.

Technology
Development, Inc./Advanced Recycling Sciences, Inc. (formerly
The Quantum Group, Inc.)

In February 2001, Technology Development, Inc.,
our subsidiary company, merged with Advanced Recycling Sciences,
Inc., a Nevada corporation. In connection with the merger, we
received 1,446,153 unregistered shares of common stock of
Advanced Recycling Sciences, Inc. Advanced Recycling Sciences,
Inc. is a public development stage company with shares traded on
the over-the-counter bulletin board under the symbol ARYC. As a
result of the merger, Advanced Recycling Sciences, Inc. acquired
the worldwide license to a technology for ground surface
application of a novel ice adhesion modification technology. As
a result of two transactions and net of sales of Advanced
Recycling Sciences, Inc. shares, we owned 2,103,053 shares of
common stock of Advanced Recycling Sciences, Inc. as of
December 31, 2002, which represents approximately 9.4% of
the total issued and outstanding common stock of Advanced
Recycling Sciences, Inc.

Watermark
Technologies, Inc./Stealth MediaLabs, Inc. (formerly BitzMart,
Inc.)

In April 2001, Watermark Technologies, Inc., our
subsidiary company, merged with Stealth MediaLabs, Inc., a
Nevada corporation. Stealth MediaLabs, Inc., is a public
development stage company with shares traded on the
over-the-counter bulletin board under the symbol SMLA. In
connection with the merger, we received 4,121,165 unregistered
shares of common stock of Stealth MediaLabs, Inc. Stealth
MediaLabs, Inc. is a developer of software for downloading media
products. As a result of the merger, Stealth MediaLabs, Inc.
acquired the exclusive worldwide license to a technology for
masking an Auxiliary Channel in the phase of Spectrum of Stereo
Audio. As a result of this merger and additional investments
that we made in Stealth MediaLabs, Inc., we owned 4,221,165
shares of common stock of Stealth MediaLabs, Inc. as of
December 31, 2002, which represents approximately 19.9% of
the issued and outstanding common stock of Stealth MediaLabs,
Inc. In addition, we also have warrants to purchase 200,000
shares of Stealth MediaLabs, Inc.s common stock at $0.50
per share.

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Micro Sensor
Technologies, Inc./Sense Holdings, Inc.

In May 2001, Micro Sensor Technologies, Inc., our
subsidiary company, merged with Sense Holdings, Inc., a Florida
corporation. Sense Holdings, Inc., is a public development stage
company with shares traded on the over-the-counter bulletin
board under the symbol SEHO. In connection with the merger, we
received 1,850,000 unregistered shares of common stock of Sense
Holdings, Inc. Sense Holdings, Inc. is a engaged in the
manufacture and sale of biometric technology. As a result of the
merger, Sense Holdings, Inc. acquired the exclusive worldwide
license to a technology for the detection of unexploded
ordinances whether buried or camouflaged. During 2002 we sold a
significant portion of our investment in Sense Holdings, Inc.,
and as of December 31, 2002, we owned 228,089 shares of
common stock of Sense Holdings, Inc., which represents
approximately 1.4% of the issued and outstanding common stock of
Sense Holdings, Inc.

Advanced
Microsphere Technology, Inc./Prime Pharmaceutical
Corporation

In April 2001, Advanced Microsphere Technology,
Inc., our subsidiary company, merged with Prime Pharmaceutical
Corporation, a Canadian corporation. Prime Pharmaceutical
Corporation is a privately held development stage company. In
connection with the merger, we received 560,000 unregistered
shares of common stock of Prime Pharmaceutical Corporation.
Prime Pharmaceutical Corporation is a developer of
dermatological treatments incorporating the latest
biotechnology. As a result of the merger, Prime Pharmaceutical
Corporation acquired the exclusive worldwide license to a new
technology, which allows for the encapsulation of a variety of
substances at low temperatures. As a result of two transactions
and an additional investment that we made in Prime
Pharmaceutical Corporation, we owned 1,493,550 shares of common
stock of Prime Pharmaceutical Corporation as of
December 31, 2002, which represents approximately 9.9% of
the issued and outstanding common stock of Prime Pharmaceutical
Corporation.

Digital Image
Enhancement Technologies, Inc./Image Analysis, Inc.

In May 2002, Digital Image Enhancement
Technologies, Inc., our subsidiary company, merged with Image
Analysis, Inc. a development stage Oklahoma corporation. Image
Analysis, Inc. is a privately held development stage company. In
connection with the merger, we received 465,000 unregistered
shares of common stock of Image Analysis, Inc. As a result of
the merger, Image Analysis, Inc. acquired the exclusive
worldwide license to a new technology, which allows for the
enhancement of digital images. As of December 31, 2002, we
owned 1,344,300 shares of common stock of Image Analysis, Inc.,
which represents approximately 15.6% of the issued and
outstanding common stock of Image Analysis, Inc.

Nitrone
Scientific, Inc./Prime Pharmaceutical Corporation

In May 2002, Nitrone Scientific, Inc., our
subsidiary company, merged with Prime Pharmaceutical
Corporation, a Canadian corporation. Prime Pharmaceutical
Corporation is a privately held development stage company. In
connection with the merger, we received 683,550 unregistered
shares of common stock of Prime Pharmaceutical Corporation.
Prime Pharmaceutical Corporation is a developer of
dermatological treatments incorporating the latest
biotechnology. As a result of the merger, Prime Pharmaceutical
Corporation acquired the license for certain specified fields of
use for the development, manufacturing and marketing in Canada
of a proprietary technology for a new class of nitrone-based
antioxidant. As a result of two transactions and an additional
investment, which we made in Prime Pharmaceutical Corporation,
we owned 1,493.500 shares of common stock of Prime
Pharmaceutical Corporation as of December 31, 2002, which
represents approximately 9.9% of the issued and outstanding
common stock of Prime Pharmaceutical Corporation.

Energy
Management Technologies, Inc./Voice and Wireless
Corporation

In June 2002, Energy Management Technologies,
Inc., our subsidiary company, merged with Voice and Wireless
Corporation, a Minnesota corporation. Voice and Wireless
Corporation is a public development stage company with shares
traded on the over-the-counter bulletin board under the symbol
VWLC. In connection with the merger, we received 318,750
unregistered shares of common stock of Voice and Wireless
Corporation. As a result of the merger, Voice and Wireless
Corporation acquired the exclusive license in the

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State of California for Facility Energy Design
Systems Software, which identifies facility energy improvements
to reduce expenditures in buildings. As a result of this merger
and a strategic alliance transaction, we owned 633,750 shares of
common stock of Voice and Wireless Corporation as of
December 31, 2002, which represents approximately 5.4% of
the issued and outstanding common stock of Voice and Wireless
Corporation.


Electronic
Luminescent Technologies, Inc./FullCircle Registry,
Inc.

In June 2002, Electronic Luminescent
Technologies, Inc., our subsidiary company, merged with
FullCircle Registry, Inc., a Nevada corporation. FullCircle
Registry, Inc. is a public development stage company with shares
traded on the over-the-counter bulletin board under the symbol
FLCR. In connection with the merger, we received 68,250
unregistered shares of common stock of FullCircle Registry, Inc.
As a result of the merger, FullCircle Registry, Inc. acquired
the world-wide, exclusive, license to a patent pending bicycle
illumination. As a result of two merger transactions and one
strategic alliance agreement, we owned 486,750 shares of common
stock of FullCircle Registry, Inc. as of December 31, 2002,
which represents approximately 3.4% of the issued and
outstanding common stock

Fiber Gel
Technologies, Inc./Circle Group Holdings, Inc (formerly Circle
Group Internet, Inc.)

In August 2002, Fiber Gel Technologies, Inc., our
subsidiary company, merged with Circle Group Holdings, Inc., an
Illinois corporation. Circle Group Holdings, Inc. is a publicly
held development stage company with shares traded on the
over-the-counter bulletin board under the symbol CRGQ. In
connection with the merger, we received 2,800,000 unregistered
shares of common stock of Circle Group Holdings, Inc. and a
warrant to purchase 500,000 shares of Circle Group Holdings
Inc.s common stock for $0.36 per share. As a result of the
merger, Circle Group Holdings, Inc. acquired the world-wide,
exclusive, license to Z-Trim, an all natural, carbohydrate-based
fat replacement. As a result of the merger and a strategic
alliance agreement, we owned 2,844,000 shares of common stock of
Circle Group Holdings, Inc. as of December 31, 2002, which
represents approximately 12.1% of the issued and outstanding
common stock

Spoken Data
Technologies, Inc./FullCircle Registry, Inc.

In September 2002, Spoken Data Technologies,
Inc., our subsidiary company, merged with FullCircle Registry,
Inc., a Nevada corporation. FullCircle Registry, Inc. is a
public development stage company with shares traded on the
over-the-counter bulletin board under the symbol FLCR. In
connection with the merger, we received 157,500 unregistered
shares of common stock of FullCircle Registry, Inc. As a result
of the merger, FullCircle Registry, Inc. acquired an exclusive,
license to a patent pending voice internet browser which allows
websites to speak HTML encoded data in response to telephone
inquiries. As a result of two merger transactions and one
strategic alliance agreement, we owned 486,750 shares of common
stock of FullCircle Registry, Inc. as of December 31, 2002,
which represents approximately 3.4% of the issued and
outstanding common stock

To date, we have entered into the following
strategic alliance and consulting agreements:

Stealth MediaLabs, Inc. (formerly BitzMart,
Inc). On
September 14, 2001, we entered into a strategic alliance
agreement to provide consulting services in exchange for 100,000
unregistered shares of common stock of BitzMart, Inc. The
agreement terminated as scheduled on September 30, 2001.
The Company recognized $231,000 in consulting revenue in 2001
related to this agreement. On November 1, 2001, we entered
an additional strategic alliance agreement to provide consulting
services in exchange for 50,000 unregistered shares of common
stock of BitzMart, Inc. for the time period ended
December 31, 2001. The Company recognized $145,500 in
consulting revenue in 2001 related to the second agreement.
Revenue from strategic alliance agreements are deferred and
recognized over the term of each agreement. For a detailed
discussion of the strategic alliance process see Business
Strategic Alliances.

Primapharm Funding
Corporation On
October 29, 2001, we entered into a strategic alliance
agreement to provide consulting services in exchange for
1,000,000 unregistered shares of common stock of Primapharm
Funding Corporation. The term of the agreement was for one year
commencing November 9,

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2001. The Company recognized $342,466 and $71,151
in consulting revenue in 2002 and 2001, respectively, related to
the agreement. Revenue from strategic alliance agreements are
deferred and recognized over the term of each agreement. For a
detailed discussion of the strategic alliance process see
Business Strategic Alliances.


USAOneStar.Net,
Inc. On
November 28, 2001, we entered into a strategic alliance
agreement to provide consulting services in exchange for 400,000
unregistered shares of common stock of USAOneStar.Net, Inc.
The term of the agreement was for one year commencing
October 22, 2001. The Company recognized $5,984 and $6,044
in consulting revenue in 2002 and 2001, respectively, related to
the agreement. Revenue from strategic alliance agreements are
deferred and recognized over the term of each agreement. For a
detailed discussion of the strategic alliance process see
Business Strategic Alliances.

Circle Group Holdings, Inc. (formerly Circle
Group Internet,
Inc.) On
January 11, 2002, we entered into a strategic alliance
agreement to provide consulting services in exchange for 48,000
unregistered shares of common stock of Circle Group Holdings,
Inc. The term of the agreement is for one year commencing on
January 12, 2002. The Company recognized $22,102 in
consulting revenue in 2002 related to the agreement. Revenue
from strategic alliance agreements are deferred and recognized
over the term of each agreement. For a detailed discussion of
the strategic alliance process see Business Strategic
Alliances.

Group Management
Corporation On
January 21, 2002, we entered into a strategic alliance
agreement to provide consulting services in exchange for 114,276
unregistered shares of common stock of Group Management
Corporation. The term of the agreement is for one year
commencing on January 21, 2002. Group Management
Corporation terminated the agreement on March 31, 2002. The
Company recognized $46,948 in consulting revenue in 2002 on the
47,615 shares of common stock it earned related to the
agreement. Revenue from strategic alliance agreements are
deferred and recognized over the term of each agreement. For a
detailed discussion of the strategic alliance process see
Business Strategic Alliances.

Voice and Wireless
Corporation On
February 11, 2002, we entered into a strategic alliance
agreement to provide consulting services in exchange for 540,000
unregistered shares of common stock of Voice and Wireless
Corporation. The term of the agreement is for one year
commencing on February 11, 2002. Voice and Wireless
Corporation terminated the agreement on August 31, 2002.
The Company recognized $23,198 in consulting revenue in 2002 on
the 315,000 shares of common stock it earned related to the
agreement. Revenue from strategic alliance agreements are
deferred and recognized over the term of each agreement. For a
detailed discussion of the strategic alliance process see
Business Strategic Alliances.

Hydrogen Technology Applications,
Inc. On April 2,
2002, we entered into a strategic alliance agreement to provide
consulting services in exchange for 48,000 unregistered shares
of common stock of Hydrogen Technology Applications, Inc. The
term of the agreement is for one year commencing on
April 2, 2002. The Company recognized $14,040 in consulting
revenue in 2002 on 36,000 shares of common stock it earned
related to the agreement. Revenue from strategic alliance
agreements are deferred and recognized over the term of each
agreement. For a detailed discussion of the strategic alliance
process see Business Strategic Alliances.

FullCircle Registry,
Inc. On June 1,
2002, we entered into a strategic alliance agreement to provide
consulting services in exchange for 30,000 unregistered shares
of common stock of FullCircle Registry, Inc. The term of the
agreement is for one year commencing on June 1, 2002. The
Company recognized $15,520 in consulting revenue in 2002 on
17,500 shares of common stock it earned related to the
agreement. Revenue from strategic alliance agreements are
deferred and recognized over the term of each agreement. For a
detailed discussion of the strategic alliance process see
Business Strategic Alliances.

Lightstream Technology,
Inc. On
September 12, 2002, we entered into a strategic alliance
agreement to provide consulting services in exchange for monthly
cash payments. The term of the agreement is for one year
commencing on September 12, 2002. Lightstream Technology,
Inc. terminated the agreement on December 31, 2002. The
Company recognized $10,000 in consulting revenue in 2002 related
to the agreement. Revenue from strategic alliance agreements are
deferred and recognized over the term of each agreement. For a
detailed discussion of the strategic alliance process see
Business Strategic Alliances.

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Pharmanex,
LLC On
September 25, 2002, we entered into a strategic alliance
agreement to provide consulting services in exchange for monthly
cash payments. The term of the agreement is for one year
commencing on September 25, 2002. The Company recognized
$15,000 in consulting revenue in 2002 related to the agreement.
Revenue from strategic alliance agreements are deferred and
recognized over the term of each agreement. For a detailed
discussion of the strategic alliance process see Business
Strategic Alliances.

Innovative Medical Services,
Inc. On
September 12, 2002, we entered into a strategic alliance
agreement to provide consulting services in exchange for 120,000
unregistered shares of common stock of Innovative Medical
Services, Inc. The term of the agreement is for one year
commencing on September 12, 2002. The Company recognized
$9,617 in consulting revenue in 2002 on 35,922 shares of common
stock it earned related to the agreement. Revenue from strategic
alliance agreements are deferred and recognized over the term of
each agreement. For a detailed discussion of the strategic
alliance process see Business Strategic Alliances.

Shriners Hospitals For
Children On
November 21, 2002, we entered into a technology transfer
engagement agreement to provide technology outsourcing services
in exchange for monthly cash payments and fifty percent of the
upfront consideration received by Shriners Hospitals For
Children from the outsourcing of their technologies by the
Company. The term of the agreement is for one year commencing on
January 1, 2003. Revenue from strategic alliance agreements
are deferred and recognized over the term of each agreement. For
a detailed discussion of the strategic alliance process see
Business Strategic Alliances. No Revenue was
recognized from this agreement prior to January 2003.

FullCircle Registry,
Inc. On
December 1, 2002, we entered into a consulting agreement to
provide business advisory services in exchange for 231,000
shares of FullCircle Registry, Inc.s unregistered common
stock. The agreement expired on December 25, 2002. The
Company recognized $198,660 in consulting revenue in 2002 on
231,000 shares of common stock it earned related to the
agreement.

Diamond V Mills,
Inc. On
January 13, 2003, we entered into a strategic alliance
agreement to provide consulting services in exchange for monthly
cash payments. The term of the agreement is for three months
commencing on January 13, 2003. Revenue from strategic
alliance agreements are deferred and recognized over the term of
each agreement. For a detailed discussion of the strategic
alliance process see Business Strategic Alliances.
No Revenue was recognized from this agreement prior to 2003.

Duraswitch Industries,
Inc. On
January 15, 2003, we entered into a strategic alliance
agreement to provide consulting services in exchange for in
exchange for 83,478 unregistered shares of common stock of
Duraswitch Industries, Inc. The term of the agreement is for one
year commencing on January 15, 2003. Revenue from strategic
alliance agreements are deferred and recognized over the term of
each agreement. For a detailed discussion of the strategic
alliance process see Business Strategic Alliances.
No Revenue was recognized from this agreement prior to 2003.

Determination of Net Asset Value

We determine the net asset value per share of our
common stock quarterly. The net asset value per share of common
stock is equal to the value of our total assets minus total
liabilities divided by the total number of shares of common
stock outstanding.

At December 31, 2002, approximately 78.95%
of our total assets represented investments recorded at fair
value. 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. Since there is typically no
readily ascertainable market value for the investments in our
portfolio, we value substantially all of our investments at fair
value as determined in good faith by the Board of Directors. In
making its determination, our Board of Directors may consider
valuation appraisals provided by independent financial experts.
Because of the inherent uncertainty of determining the fair
value of investments that do not have a readily ascertainable
market value, the fair value of our investments determined in
good faith by the Board of Directors may differ significantly
from the values

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that would have been used had a ready market
existed for the investments, and the differences could be
material.


There is no single standard for determining fair
value in good faith. As a result, determining fair value
requires that judgment be applied to the specific facts and
circumstances of each portfolio investment while employing a
consistently applied valuation process for the types of
investments we make. We will record unrealized depreciation on
investments when we believe that an investment has become
impaired, including where realization of an equity security is
doubtful. Conversely, we will record unrealized appreciation if
we have an indication that the underlying portfolio company has
appreciated in value and, therefore, our equity security has
also appreciated in value, where appropriate.

With respect to private equity securities, 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 sale are generally valued at
a discount from the public market value of the securities.
Restricted and unrestricted publicly traded stocks may also be
valued at discounts due to the size of our investment or market
liquidity concerns.

The 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.

We have retained Bolten Financial Consulting,
Inc. to provide us with quarterly valuations of our portfolio of
equity securities. We pay Bolten Financial Consulting, Inc. a
fee each time it values our investments. In 2002, we paid Bolten
Financial Consulting, Inc. $90,232 for its valuation services.

Portfolio Company Transactions

The capital stock we receive from portfolio
companies, is expected to be acquired primarily in private
transactions negotiated directly with the portfolio company or
an affiliate. Our management will continue to be principally
responsible for conducting negotiations with respect to our
investments in portfolio companies.

In addition to securities of portfolio companies
that we receive as a result of mergers by our subsidiary
companies, we may invest a portion of our other assets in the
publicly traded securities of public companies. Such investments
and other investments that are not qualifying assets
may not exceed 30% of the value of our total assets at the time
of any such investment.

Based on the amount of existing available funds,
it is not likely that we will be able to acquire securities in a
large number of companies. As a result, our investments will not
be substantially diversified. Furthermore, the technologies that
our subsidiary companies acquire have been, and are expected to
be, sold primarily to early stage public and private companies.
Accordingly, the securities we receive upon the merger of our
subsidiary companies will not be diversified among companies at
various stages of development and we will not derive the
benefits, which may arise from making multi-tiered investments.

Employees

As of December 31, 2002, we employed
seventeen employees in our two offices. Of these employees, nine
are based in our Plant City, Florida office and eight are based
in our UK office. We believe our relations with our employees
are good.

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Regulation Under the 1940 Act

We have elected to be regulated as a BDC under
the 1940 Act. A BDC is a special type of closed-end,
non-diversified investment company regulated by the 1940 Act.
The Small Business Investment Incentive Act of 1980 (which we
refer to as the Incentive Act) modified the provisions of the
1940 Act applicable to a BDC. After filing its election to be
treated as a BDC, a company may not withdraw its election
without first obtaining the approval of holders of a majority of
its outstanding voting securities (as defined under the 1940
Act). The following is a brief description of certain provisions
of the 1940 Act, as modified by the Incentive Act, and is
qualified in its entirety by reference to the full text of the
1940 Act, the Incentive Act and the rules thereunder.

Generally, to be eligible to elect BDC status, a
company must engage in the business of furnishing capital and
making available significant managerial assistance to companies
that do not have ready access to capital through conventional
financial channels. Such portfolio companies are termed
eligible portfolio companies. More specifically, in
order to qualify as a BDC, a company must (i) be a domestic
company; (ii) have registered a class of its equity
securities or have filed a registration statement with the
Securities and Exchange Commission pursuant to Section 12
of the Exchange Act; (iii) be operated for the purpose of
investing in the securities of certain types of portfolio
companies, namely, development-stage or emerging companies and
businesses suffering or just recovering from financial distress;
(iv) make available significant managerial assistance
generally to such portfolio companies; (v) have a majority
of directors who are not interested persons (as
defined in the 1940 Act), and (vi) file a proper notice of
election with the SEC.

An eligible portfolio company is generally a
domestic company that is not an investment company and that
(i) does not have a class of securities registered on an
exchange or included in the Federal Reserve Boards
over-the-counter margin list; (ii) is actively controlled
by the BDC and has an affiliate of a BDC on its board of
directors; or (iii) meets such other criteria as may be
established by the SEC. Control under the 1940 Act is presumed
to exist where a BDC beneficially owns more than 25% of the
outstanding voting securities of the portfolio company.

The 1940 Act prohibits or restricts companies
subject to the 1940 Act from investing in certain types of
companies, such as brokerage firms, insurance companies,
investment banking firms and investment companies. Moreover, the
1940 Act limits the type of assets that BDCs may acquire to
certain prescribed qualifying assets and certain assets
necessary for its operations (such as office furniture,
equipment and facilities) if, at the time of acquisition, less
than 70% of the value of the BDCs assets consists of
qualifying assets. Qualifying assets include:



| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | privately acquired securities of companies that
    were eligible portfolio companies at the time such BDC acquired
    their securities;
|
| |  | securities of bankrupt or insolvent companies;                                                                                           
|
| |  | securities of eligible portfolio companies
    controlled by a BDC;                                                                      
|
| |  | securities received in exchange for or
    distributed on or with respect to any of the foregoing, and                                   
|
| |  | cash items, government securities and
    high-quality short-term debt.                                                                  

The 1940 Act also places restrictions on the
nature of the transactions in which, and the persons from whom,
securities can be purchased in order for the securities to be
considered qualifying assets. Such restrictions include limiting
purchases to transactions not involving a public offering and
acquiring securities directly from either the portfolio company
or their officers, directors or affiliates.

We are permitted by the 1940 Act, under specified
conditions, to issue multiple classes of senior debt and a
single class of preferred stock if our asset coverage, as
defined in the 1940 Act, is at least 200% after the issuance of
the debt or the preferred stock (i.e., such senior securities
may not be in excess of 50% of our net assets). If the value of
our net assets, as defined, were to increase through the
issuance of additional capital stock or otherwise, we would be
permitted under the 1940 Act to issue additional senior
securities. We have no

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senior securities outstanding and have no current
intention of issuing any senior securities although we may do so
in the future.


We may sell our securities at a price that is
below the net asset value per share only (i) after a
majority of our disinterested directors has determined that such
a sale would be in our best interests and the best interests of
our stockholders, and (ii) upon the approval by the holders
of a majority of our outstanding voting securities, including a
majority of the voting securities held by non-affiliated
persons, of such a policy or practice within one year prior to
such sale. If the offering of the securities is underwritten, a
majority of the disinterested directors must determine in good
faith that the price of the securities being sold is not less
than a price which closely approximates the market value of the
securities, less any distribution discounts or commissions. As
defined in the 1940 Act, the phrase majority of our
outstanding voting securities means the vote of
(i) 67% or more of our common stock present at a meeting,
if the holders of more than 50% of our outstanding common stock
are present or represented by proxy, or (ii) more than 50%
of our outstanding common stock, whichever is less.

Many of our transactions with our affiliates (as
well as affiliates of those affiliates) which were prohibited
without the prior approval of the SEC under the 1940 Act prior
to its amendment by the Incentive Act are now permissible upon
the prior approval of a majority of our disinterested directors
and a majority of the directors having no financial interest in
the transactions. However, certain transactions involving
certain persons with whom we are associated, including our
directors, officers, and employees, may still require the prior
approval of the SEC. In general:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any person who owns, controls or holds power to
    vote more than 5% of our outstanding common stock;                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | any director, executive officer or general
    partner of that person; and                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | any person who directly or indirectly controls,
    is controlled by, or is under common control with, that person,
    must obtain the prior approval of a majority of our
    disinterested directors and, in some situations, the prior
    approval of the SEC, before engaging in certain transactions
    involving us or any company under our control. The 1940 Act
    generally does not restrict transactions between a company and
    its portfolio companies.

We will be periodically examined by the SEC for
compliance with the 1940 Act.

As with other companies regulated by the 1940
Act, a business development company must adhere to certain
substantive regulatory requirements. A majority of our directors
must be persons who are not interested persons, as that term is
defined in the 1940 Act. Additionally, we are required to
provide and maintain a bond issued by a reputable fidelity
insurance company to protect the business development company.
Furthermore, as a business development company, we are
prohibited from protecting any director or officer against any
liability to the company or our shareholders arising from
willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
persons office.

While a BDC may change the nature of its business
so as to cease being a BDC or, under certain circumstances, to
change its business purpose, it may do so only if authorized by
a majority vote (as defined in the 1940 Act) of its outstanding
voting securities. We are entitled to change our
non-diversification status without stockholder approval. If we
lose our status as a BDC, we would become subject to more
stringent regulation under the 1940 Act to the extent we could
qualify for an exemption from 1940 Act regulation.

Income Tax Matters

For federal and state income tax purposes, we are
taxed at regular corporate rates on ordinary income and
recognize gains on distributions of appreciated property. We are
not entitled to the special tax treatment available to most
regulated investment companies because, among other reasons, we
do not distribute at least 90% of investment company
taxable income as required by the Internal Revenue Code
for such treatment. Distributions of cash or property by us to
our stockholders, if any, will be taxable as dividends only to
the extent that we have current or accumulated earnings and
profits. Distributions in excess of current or accumulated
earnings and profits will be treated first as a return of
capital to the extent of the holders tax

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basis and then as gain from the sale or exchange
of property. Each investor is urged to consult with his or her
tax advisor concerning the federal, state and local, and foreign
tax consequences of an investment in our company.


Competition

The technology transfer business is a highly
competitive business. We expect that if our investment model
proves to be successful, our current competitors in the
technology transfer market may duplicate our strategy and new
competitors may enter the market. We compete against other
technology transfer companies, some of which are much larger and
have significantly greater financial resources than we do. In
addition, these companies will be competing with our portfolio
companies to acquire technologies from universities and
government research laboratories. We cannot assure you that we
will be able to successfully compete against these competitors
in the acquisition of technology licenses, funding of technology
development or marketing of portfolio companies.

Risk Factors

Our quarterly and annual results could
fluctuate significantly.

The Companys quarterly and annual operating
results could fluctuate significantly due to a number of
factors. These factors include the small number and range of
values of the transactions that are completed each quarter,
fluctuations in the values of our investments, the timing of the
recognition of unrealized gains and losses, the degree to which
we encounter competition in our markets, the volatility of the
stock market and its impact on our unrealized gains and losses,
as well as other general economic conditions. As a result of
these factors, quarterly and annual results are not necessarily
indicative of the Companys performance in future quarters
and years.

Our investment model is highly speculative in
nature and our history of investments using the model is
limited.

Our investment model is highly speculative since
it involves making investments in new development stage
companies and having those companies invest in new, untested
technology. Furthermore, we have only been using our investment
model for a relatively short period of time and have little or
no historical information upon which to judge whether or not the
model is successful. We cannot assure you that our investment
model will be successful or that any of our investments will be
successful.

Our portfolio companies are development stage
companies dependent upon the successful commercialization of new
technologies. Each of our investments in portfolio companies is
subject to a high degree of risk and we may lose all of our
investment in a portfolio company if it is not
successful.

We invest in development stage companies that our
management believes can benefit from our expertise in technology
transfer. Development stage companies are subject to all of the
risks associated with new businesses. In addition, our portfolio
companies are also subject to the risks associated with research
and development of new technologies. These risks include the
risk that new technologies cannot be identified, developed or
commercialized, may not work, or are obsolete. Our portfolio
companies must successfully acquire licenses to new
technologies, and in some cases further develop new
technologies. We cannot assure you that any of our investments
in our portfolio companies will be successful. Our portfolio
companies will be competing with larger, established companies,
with greater access to, and resources for, further development
of these new technologies. We may lose our entire investment in
any or all of our portfolio companies.

Our portfolio companies depend upon the
research and development activities of universities, over which
neither our portfolio companies nor we have any
control.

Our portfolio companies depend upon the research
activities of universities and government research facilities.
Neither we, nor our portfolio companies, have any control over
the research activities of universities and research
laboratories. As neither we, nor our portfolio companies provide
supervision of any university or laboratory research, we cannot
warrant that the research will be done properly and that the
results, which we

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may license will be reproducible. In addition, we
have no control over what types of research are presented to us
by universities and government research facilities for
evaluation and commercial development. Further, the licenses to
technologies that our portfolio companies obtain may be
non-exclusive. In the event that we make an investment in a
portfolio company, and we are unable to locate a new technology
to be acquired by the portfolio company, we could lose our
entire investment.


Technologies acquired by our portfolio
companies may become obsolete before we can sell their
securities.

Neither our portfolio companies nor we have any
control over the pace of technology development. There is a
significant risk that an portfolio company could acquire the
rights to a technology that is currently or is subsequently made
obsolete by other technological developments. We cannot assure
you that any of our portfolio companies will successfully
acquire, develop and transfer any new technology.

The patents on the technologies that our
portfolio companies license may infringe upon the rights
of others and patent applications that the universities have
submitted may not be granted.

Many of our portfolio companies rely upon patents
to protect the technologies that they license. If the patents on
technologies that they license are found to infringe upon the
rights of others, or are held to be invalid, then the licenses
to such technologies will have little or no value to our
portfolio companies. In addition, if a patent licensed by a
portfolio company is found to infringe upon the rights of
others, the portfolio company may be liable for monetary
damages. Our portfolio companies are dependent upon the
universities or government research facilities to file, secure
and protect patents on licensed technologies. In the event that
a patent is challenged or violated, our portfolio companies may
not have the financial resources to defend the patent either in
the preliminary stages of litigation or in court. In addition,
if our portfolio companies acquire licenses to technologies with
patents pending, we cannot assure you that such patents will be
granted.

Technologies that have been developed with
funding from the United States government may have limits on
their use, which could affect the value of the technology to a
portfolio company.

Technologies developed with funds provided by the
United States government have restrictions regarding where they
may be sold and have limits on exclusivity. A portfolio company
that acquires a technology developed with federal funding may be
limited as to where it can sell the technology. The technology
may only be allowed to be sold or manufactured within the United
States. In addition, under Section 23 of the United States
Code, the U.S. government has the right to use technologies that
it has funded regardless of whether the technology has been
licensed to a third party. Such regulations may limit the
marketability of a technology and therefore reduce the value of
the technology to our portfolio companies.

We may need to make additional investments in
our portfolio companies to provide them with capital to further
develop licensed technologies.

We may have to make additional investments in our
portfolio companies to protect our overall investment value in
the particular company. We retain the discretion to make any
additional investments as our management determines. The failure
to make such additional investments may jeopardize the continued
viability of a portfolio, and our initial (and subsequent)
investments. Moreover, additional investments may limit the
number of companies in which we can make initial investments. We
have no established criteria in determining whether to make an
additional investment except that our management will exercise
its business judgment and apply criteria similar to those used
when making the initial investment. We cannot assure you that we
will have sufficient funds to make any necessary additional
investments, which could adversely affect our success and result
in the loss of a substantial portion or all of our investment in
a portfolio company.

We may be unable or decide not to make
additional investments in our portfolio companies that, could
result in our losing our initial investment if the portfolio
company fails. Our ownership and control may be diluted if a
portfolio company obtains additional funds from third-party
investors.

Our agreement with third-party investors
restricts the size of our investment in any single portfolio
company and, as a result, could prohibit an additional
investment in a portfolio company in the event that our initial
investment represented 10% or more of our assets. Even if we are
able to make an additional investment

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in a portfolio company within the prescribed
limits, we may elect not to make an additional investment in a
portfolio company in order to limit the size of our investment,
which is at risk. It is also our policy not to make loans to our
portfolio companies that in the aggregate exceed 25% of our net
assets. Therefore, if a portfolio company requires additional
funds to continue operating, and we cannot or choose not to make
an additional investment, our investment in the portfolio
company may decline in value. In addition, to the extent that a
portfolio company seeks additional financing from third parties,
our ownership interest and control of the portfolio company may
be diluted.


The securities we hold in our portfolio
companies are subject to restriction on resale and we may not be
able to sell the securities we hold for amounts equal to their
recorded value, if at all.

Our portfolio companies are all private entities
or thinly traded public companies and we acquire securities in
our portfolio company in private transactions. As a result, all
of the securities we hold in our portfolio companies are
restricted securities, as defined under the Securities Act of
1933, and are subject to restrictions on resale. Furthermore, we
do not anticipate that a highly liquid public market will exist
for any of the securities we hold in our portfolio companies.
Therefore, we cannot assure you that we will be able to sell our
portfolio company securities for amounts equal to the values
that we have ascribed to them or at the time we desire to sell.

We are dependent on merger transactions,
structured as tax-free exchanges to sell our subsidiary
companies. A change in the Internal Revenue Code affecting
tax-free exchanges could reduce our ability to sell our
subsidiary companies.

We do not anticipate selling any of our
subsidiary companies, except in connection with merger
transactions. We anticipate that most, if not all, of such
merger transactions will be structured as tax-free exchanges
under Section 368 of the Internal Revenue Code. If
Section 368 were to be amended so that we were no longer
able to structure our merger transactions as tax-free exchanges,
we may not be able to sell our subsidiary companies on
commercially reasonable terms. If we are unable to successfully
sell our subsidiary companies in a merger transaction, we may
lose our investment.

We have been dependent on a small number of
companies, several of which are controlled by the same investor
group for the purchase of our subsidiary companies. We have only
limited experience selling our subsidiary companies and of the
twenty-one transactions that we have completed, seven have been
to companies controlled by the same group of
investors.

As of December 31, 2002, we have completed
only twenty-one transactions, including twenty mergers and one
stock sale, wherein we sold our subsidiary companies to other
companies and seven of these sales have been made to companies
that are controlled by the same investor group. As of
December 31, 2002, the same investor group had control of
Lexon, Inc., Image Analysis, Inc., Centrex, Inc. and Nubar, Inc.
As a result, we have only had the benefit and experience of
negotiating such agreements with a small number of investors. We
cannot assure you that we will be able to successfully negotiate
merger transactions for the sale of our subsidiary companies in
the future.

The agreements we have with universities do
not guarantee that the universities will grant licenses to our
subsidiary companies.

The agreements that we have entered into with
universities provide us with the ability to evaluate the
commercial potential for technologies at an early stage of
development. These agreements, however, do not provide us with
any guarantee that following our evaluation, a university will
grant us a license. As a result, we may expend time and
resources evaluating a technology and not be able to secure a
license to such technology for one of our subsidiary companies.

We are dependent upon our managements
ability to identify portfolio companies for our subsidiary
companies.

Our investment strategy is based upon selling our
subsidiary companies in stock for stock exchanges to portfolio
companies that wish to acquire the technologies owned by our
subsidiary companies but which they may be neither operating nor
established. We do not expect to sell any securities of our
subsidiary companies

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to the public. Therefore, if we fail to identify
a portfolio company for a subsidiary company, our entire
investment in the portfolio company could be lost.


We are dependent upon and have little or no
control over the efforts of companies that acquire our
subsidiary companies to successfully commercialize the acquired
technologies or to retain the license to the
technology.

When we sell a subsidiary company, we receive
common stock from the portfolio company based upon the mutually
agreed upon values of the subsidiary company, its licensed
technology and the portfolio company. We then intend to sell the
securities that we acquire in exchange for our subsidiary
companies at some time in the future. Therefore, our ability to
profit from an investment is ultimately dependent upon the price
we receive for the shares of the portfolio company. In most
cases, the companies that acquire our subsidiary companies will
be dependent upon successfully commercializing the technologies
they acquire. We do not have control over the portfolio
companies that acquire our subsidiary companies. These portfolio
companies may face intense competition, including competition
from companies with greater financial resources, more extensive
research and development, manufacturing, marketing and service
capabilities and a greater number of qualified and experienced
managerial and technical personnel. They may face additional
risks of product and technological obsolescence and government
regulation over which we will have little or no control. They
may need additional financing which they are unable to secure
and we are unable or unwilling to provide or they may be subject
to adverse developments unrelated to the technologies they
acquire. They may lose the rights granted to them for the
technology for failure to comply with the license agreement. We
cannot assure you that any of the portfolio companies that
acquire our subsidiary companies will be successful or that we
will be able to sell the securities we receive at a profit or
for sufficient amounts to even recover our initial investment in
the portfolio companies.

The companies that have merged with our
subsidiary companies and the companies for which we render
services in connection with strategic alliances to date are
development stage companies and, as a result, the value of the
securities that we receive in such merger transactions is
subject to significant fluctuations.

Historically we have merged, and we intend to
continue to merge, our subsidiary companies with companies in
related fields that are development stage companies. In
addition, the companies for which we render services in
connection with strategic alliances are development stage
companies. As a result, the securities that we receive in such
transactions are subject to all of the risks associated with
securities of development stage companies. The values of these
securities may be subject to significant fluctuations. We cannot
assure you that when we sell these securities we will receive
the value ascribed to the securities either at the time of
acquisition or during subsequent valuation periods.

Our investments in our portfolio companies may
be concentrated in one or more industries and if these
industries should decline or fail to develop as expected our
investments will be lost.

Our investments in our portfolio companies may be
concentrated in one or more industries. This concentration will
mean that our investments will be particularly dependent on the
development and performance of those industries. Accordingly,
our investments may not benefit from any advantages, which might
be obtained with greater diversification of the industries in
which our portfolio companies operate. If those industries
should decline or fail to develop as expected, our investments
in our portfolio companies in those industries will be subject
to loss.

We generally receive equity securities of the
portfolio companies that acquire our subsidiary companies and
for the services we render in connection with strategic
alliances, rather than cash. We recognize revenues from these
transactions; however, the securities that we receive will be
subject to restrictions on resale, which will limit our ability
to sell these securities and attain liquidity.

The securities that we receive in exchange for
our subsidiary companies and in connection with strategic
alliances will be subject to restrictions on resale, which will
limit our ability to sell these securities. As of
December 31, 2002, all of the securities we have received
in exchange for our subsidiary companies and in connection with
strategic alliances are restricted securities, as
such term is defined under Rule 144 of the Securities Act
of 1933. These shares are restricted securities because they
were issued in private transactions

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not involving a public offering and may not be
sold in the absence of registration other than in accordance
with Rule 144 under the Securities Act of 1933 or another
exemption from registration. As a result of such restrictions,
our ability to sell or otherwise transfer the securities will be
limited. We cannot assure you that we will be able to receive
upon resale, the recorded value of our portfolio company
securities.


We may not be able to merge our subsidiary
companies with publicly traded entities and so we may receive
non-publicly traded securities in exchange for our subsidiary
companies. We may be required to sell the securities we receive
at a substantial discount to their appraised value if no public
market exists.

At December 31, 2002, we have completed
twenty-one sales of subsidiary companies. Of these sales,
fifteen have been to companies that are currently publicly
traded, and the remaining transactions have been with
privately-owned companies. We are substantially dependent upon
the ability of non-public acquirers of our subsidiary companies
to implement a plan, which would facilitate a trading market for
their securities, or other strategy, which would allow for the
potential sale of our ownership interest. In addition, to the
extent that we own more than 10% of an portfolio companys
shares, we may be deemed to be an affiliate of the portfolio
company which would limit our ability to dispose of securities
we receive for our subsidiary companies. Further, our ability to
sell the securities we receive for our subsidiary companies may
be limited by, and subject to, the lack of or limited nature of
a trading market for the securities and the volatility of the
stock market as a whole. Such limitations could prevent or delay
any sale of our investments or significantly reduce the amount
of proceeds, if any, that might otherwise be realized therefrom.

The values we place on our investments may not
accurately reflect their future value or the value that we will
receive for them when we sell them.

At December 31, 2002 and December 31,
2001 respectively, investments amounting to $6,208,090 or 84.5%
of net assets and $9,988,772 or 100.8% of net assets, have been
valued at fair value as determined by our Board of Directors. As
a general matter, restricted securities and securities without
an active trading market are more difficult to accurately value
than unrestricted, actively traded securities of public
companies. Pursuant to the requirements of the 1940 Act, the
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. In making its
determination, the Board of Directors has considered valuation
appraisals provided by an independent financial expert. If we
were required to sell any of such investments, there is no
assurance that the fair value, as determined by the Board of
Directors, would be obtained. If we were unable to obtain fair
value for such investments, there would be an adverse effect on
our net asset value and on the price of our common stock.

Your ownership interest and the value of the
shares of our common stock may be diluted by the exercise of
stock options and warrants we have granted or may grant in the
future.

We have adopted two stock option plans under
which certain of our employees, officers and directors may be
granted options. As of December 31, 2002, we have granted
options to purchase 637,534 shares of our common stock to
certain officers and employees. We have also reserved an
additional 112,466 shares of our common stock for issuance under
our two stock option plans to key employees and directors. In
addition, we have issued warrants to the underwriter of our
initial public offering, upon payment of the purchase price of
$.0003 per warrant, to purchase 100,000 shares of common stock
at an exercise price of $9.90 per share. The warrants expire on
October 25, 2005. The issuance and sale of these shares of
common stock will dilute the ownership interest of investors and
may have an adverse effect on the price of our common stock.

Our business depends on key
personnel.

We rely, and will continue to be substantially
dependent upon, the continued services of our management,
principally our Chief Executive Officer and Chairman of the
Board, Clifford M. Gross. Our management team is responsible for
the review of potential investments by and the provision of
advice to our portfolio companies regarding the acquisition of
technologies and additional research and development. We also
depend upon our managements key contacts with
universities, to maintain our access to new technologies, and
their relationships with companies in the private sector in
order to effectuate the sale of our subsidiaries.

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Any transactions we engage in with affiliates
may involve conflicts of interest.

The 1940 Act restricts transactions between the
Company and any of its affiliates, including its officers,
directors or employees and principal stockholders. In many
cases, the 1940 Act prohibits transactions between such persons
and ourselves unless we first apply for and obtain an exemptive
order from the SEC. Delays and costs in obtaining necessary
approvals may decrease or even eliminate any profitability of
such transactions or make it impracticable or impossible to
consummate such transactions. These affiliations could cause
circumstances that would require the SECs approval in
advance of proposed transactions by us in portfolio companies.
Further, depending upon the extent of our managements
influence and control with respect to such portfolio companies,
the selection of the affiliates of management to perform such
services may not be a disinterested decision, and the terms and
conditions for the performance of such services and the amount
and terms of such compensation may not be determined at
arms-length negotiations.

We have a limited amount of funds available
for investment in either portfolio or subsidiary companies and,
as a result, our investments will lack
diversification.

Based on the amount of our existing available
funds, it is unlikely that we will be able to commit our funds
to investments in, and the acquisition of, securities of a large
number of companies. We intend to continue to operate as a
non-diversified investment company within the meaning of the
1940 Act. Prospective investors should understand that our
current investments are not, and in the future may not be,
substantially diversified. We will not be able to achieve the
same level of diversification as larger entities engaged in
similar venture capital activities. Therefore, our assets may be
subject to greater risk of loss than if they were more widely
diversified, because the failure of one or more of our limited
number of investments could have a material adverse effect on
our financial condition and the price of our common stock.

We are subject to government regulations
because of our status as a business development
company.

We have elected to be treated as a BDC under the
Small Business Incentive Act of 1980, which modified the 1940
Act. Although the Incentive Act relieves BDCs from compliance
with many of the provisions of the 1940 Act, the Incentive Act
imposes on BDCs greater restrictions on permitted types of
investments. Moreover, the applicable provisions of the 1940 Act
impose numerous restrictions on our activities, including
restrictions on the nature of our investments and transactions
with affiliates. We cannot assure you that this legislation will
be interpreted or administratively implemented in a manner
consistent with our objectives and manner of operations. Upon
approval of a majority of our stockholders, we may elect to
withdraw our status as a BDC. If we elect to withdraw our
election, or if we otherwise fail to qualify as a BDC, we may be
subject to substantially greater regulation under the 1940 Act.
Compliance with such regulations would significantly increase
our costs of doing business.

We have a limited operating history upon which
you can assess our prospects and we are subject to the risks
associated with any new business.

As a result of our short history of operations,
we have only consummated transactions with a very small number
of companies. Therefore, there is little historical information
regarding our operations upon which you can base your investment
decision. In addition, we are subject to all of the business
risks and uncertainties associated with any new business
enterprise. We cannot assure you that our investment objective
will be attained.

Our management has limited experience
operating a technology transfer business, and managing and
operating a business development company.

The members of our management have been engaged
in the operation of our business for a short period of time and
so have limited experience. Some of our directors and executive
officers only have experience in science and research.
Furthermore, we commenced operations as a business development
company in September 2000 and so our directors and executive
officers have only had experience operating a business
development company. In addition, our management has had limited
experience in the areas of corporate finance and corporate
mergers.

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One of our current stockholders has
significant influence over our management and affairs.

Clifford M. Gross, our Chief Executive Officer
and Chairman, beneficially owns approximately 50% of our common
stock as of December 31, 2002. Therefore, Dr. Gross
will be able, among other things, to elect directors, change our
investment policies, and withdraw our election to operate as a
BDC.

We may be dependent upon the availability of
additional financings.

As of December 31, 2002 we had $745,926 in
cash and cash equivalents and commitments for $247,000 in
additional debt or equity capital. Due to the nature of our
business and the illiquid nature of many of our investments,
raising additional capital in todays economy may be
difficult, if it becomes necessary. Due to economic conditions,
we may not be able to secure additional financing at all or on
terms we deem acceptable. If we obtain additional funds by
selling any of our equity securities, the percentage ownership
of our stockholders will be reduced, stockholders may experience
additional dilution, or the equity securities may have rights,
preferences or privileges senior to the common stock. If we
obtain additional funds by selling our investments, there can be
no assurance that we will be able to negotiate a favorable price
for those investments or that the loss of those investments will
not affect our future business prospects. If adequate funds are
not available to us or available to us on satisfactory terms, we
may be required to further limit our marketing, research and
development activities, or other operations, or otherwise modify
our business strategy.




Item 2.     Properties

Our principal office is located at 202 S.
Wheeler Street, Plant City, Florida. Our lease for approximately
2700 square feet of office space at that location expires in
March 2004. We believe our office space is suitable for our
needs for the foreseeable future.

Our UK office is located at Buckland House, Dower
Mews, High Street, Berkhamsted Herts HP4 2BL, UK. Our
lease of office space at that location expires in September
2003. We believe our office space is suitable for our needs for
the foreseeable future.




Item 3.     Legal
Proceedings

The Company may also be a party from time to time
in certain lawsuits in the normal course of business. While the
outcome of these legal proceedings cannot at this time be
predicted with certainty, we do not expect that these
proceedings will have a material effect upon our financial
condition or results of operations.




Item 4.     Submission
of Matters to a Vote of Security Holders

No matters were submitted to a vote of
shareholders during the quarter ended December 31, 2002.




PART II




Item 5.     Market
for Registrants Common Equity and Related Stockholder
Matters

Computershare Trust Company Inc.,
350 Indiana Street, Suite 800, Golden, CO 80401;
303-262-0600, serves as transfer agent for the Companys
common stock. Certificates to be forwarded should be mailed
directly to the transfer agent, preferably by registered mail.

The Companys shares of common stock began
to trade on the Nasdaq SmallCap Market on October 25, 2000,
under the symbol UTOB. On March 25, 2002, our
shares of common stock commenced trading on the American Stock
Exchange (AMEX) under the symbol UTK. In conjunction
with our move to AMEX, our common stock no longer trades on the
Nasdaq Small Cap Market. The Company had approximately
500 shareholders at March 21, 2003. The net asset
value per share of the Companys common stock at

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December 31, 2002 was $1.88. The following
table reflects the high and low closing prices by quarter for
the Companys common stock on the AMEX and Nasdaq SmallCap
Market for 2002 and 2001, as appropriate.


|                 |                                         |      |   |      |  |  |   |      | 
|---------------- | --------------------------------------- | ---- | - | ---- |  |  | - | ---- | 
|                 |                                         | High |   | Low 
|                 |                                         |      |   |     
|Fiscal year 2001 |                                         |      |   |      |  |  |   |     
|                 | January 1, 2001  March 31,
    2001    |      | $ | 7.50 |  |  | $ | 5.75 | 
|                 | April 1, 2001  June 30, 2001           |      | $ | 8.05 |  |  | $ | 7.00 | 
|                 | July 1, 2001  September 30,
    2001   |      | $ | 8.45 |  |  | $ | 7.40 | 
|                 | October 1, 2001 
    December 31, 2001 |      | $ | 7.55 |  |  | $ | 7.00 | 
|Fiscal year 2002 |                                         |      |   |      |  |  |   |     
|                 | January 1, 2002  March 31,
    2002    |      | $ | 7.25 |  |  | $ | 7.00 | 
|                 | April 1, 2002  June 30, 2002           |      | $ | 7.35 |  |  | $ | 6.90 | 
|                 | July 1, 2002  September 30,
    2002   |      | $ | 7.25 |  |  | $ | 6.80 | 
|                 | October 1, 2002 
    December 31, 2002 |      | $ | 7.10 |  |  | $ | 5.50 | 

For the fiscal years ended December 31, 2002
and 2001, the Company did not declare or pay dividends.

During 2002 and 2001, we issued 10,000 and
133,446 shares respectively of our common stock pursuant to an
exemption from the registration requirements of the 1933 Act
under section 4(2) of the 1933 Act as a transaction by an
issuer not involving a public offering.

We have never declared or paid any dividends to
the holders of our common stock and we do not anticipate paying
dividends in the foreseeable future. We currently intend to
retain all earnings for general corporate purposes. Our Board of
Directors will have sole discretion in determining whether to
declare and pay dividends in the future. The declaration of
dividends will depend on our profitability, financial condition,
cash requirements, future prospects and other factors deemed
relevant by our Board of Directors. Our ability to pay dividends
in the future could be limited or prohibited by regulatory
requirements and the terms of financing agreements that we may
enter into or by the terms of any preferred stock that we may
authorize and issue.

Equity Compensation Plan Information

The following table sets forth information as of
the end of December 31, 2002, with respect to compensation
plans under which equity securities of the Company are
authorized for issuance.

|                                                               |  |                               |         |                           |  |                                          |      |  |  |  |         | 
|-------------------------------------------------------------- |  | ----------------------------- | ------- | ------------------------- |  | ---------------------------------------- | ---- |  |  |  | ------- | 
|                                                               |  |                               |         |                           |  | (c)                                     
|                                                               |  | (a)                           |         | (b)                       |  | Number of securities remaining available
|                                                               |  | Number of securities to be    |         | Weighted-average exercise |  | for future issuance under equity        
|                                                               |  | issued upon exercise of       |         | price of outstanding      |  | compensation plans (excluding           
|                                                               |  | outstanding options, warrants |         | options, warrants and     |  | securities                              
|Plan category                                                  |  | and rights                    |         | rights                    |  | reflected in column (a))                
|                                                               |  |                               |         |                           |  |                                         
|Equity compensation plans approved by security
    holders     |  |                               | -0-     |                           |  |                                          | -0-  |  |  |  | -0-     | 
|Equity compensation plans not approved by
    security holders |  |                               | 637,534 |                           |  | $                                        | 6.79 |  |  |  | 112,466 | 
|Total                                                          |  |                               | 637,534 |                           |  | $                                        | 6.79 |  |  |  | 112,466 | 

The Company has two stock option plans: the UTEK
Corporation Stock Option Plan adopted in 1999 (the 1999
Plan) and the 2000 Non-Qualified Stock Option Plan of UTEK
Corporation adopted in 2000 (the 2000 Plan).

The purpose of the 1999 Plan is to enable the
Company to compete successfully in attracting, motivating and
retaining employees with outstanding abilities. The options are
intended to be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code. The 1999 Plan is
administered by the Compensation Committee of the Companys
Board of Directors.

Under the 1999 Plan, the Company is authorized to
issue options to purchase up to 500,000 shares of Company common
stock. All officers and other employees who perform significant
services for or on behalf of the Company are eligible to
participate in the 1999 Plan. The Company may grant both
incentive stock options within the meaning of Section 422
of the Code and stock options that do not qualify for incentive
treatment under the Code.

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The exercise price of each incentive stock option
under the 1999 Plan will be determined by the Compensation
Committee, but will not be less than 100% of the current market
value of the common stock on the date of grant (or 110% in the
case of an employee who at the time owns more than 10% of the
total combined voting power of all classes of capital stock).
The non-qualified option exercise price will be determined by
the Compensation Committee, but will not be less than 100% of
the current market value of the common stock on the date of
grant.

Under the 2000 Plan, the Company is authorized to
issue options to purchase up to 250,000 shares of the
Companys common stock. All officers and other employees as
well as other persons who perform significant services for or on
behalf of the Company are eligible to participate in the 2000
Plan.

The Company may grant under the 2000 Plan only
stock options that do not qualify for incentive treatment under
Section 422 of the Code. The exercise price for the 2000
Plan options will be determined by the Compensation Committee,
but will not be less than 100% of the current market value of
the common stock on the date of grant.

An incentive stock option shall expire five years
from the date of grant. The Compensation Committee may provide
in the stock option agreement that the option expires
30 days following the termination of employment for any
reason other than death or disability or 12 months
following termination of employment by death or disability. In
no event shall any option granted be exercised after the
expiration date of such option as specified in the applicable
option agreement.

On March 2002, the SEC issued public notice of an
application submitted by the Company requesting that it be
permitted to grant its non-officer directors options to purchase
shares of its common stock under the 2000 Plan. In April 2002,
the SEC issued an order on granting the Company permission to
issue stock options under the 2000 Plan to its non-officer
directors.




Item 6.     Selected
Financial Data

The following table presents our summary
consolidated financial and other data and has been derived from
our audited financial statements for the years ended
December 31, 2002, 2001, 2000, 1999 and 1998. The
information below should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements and the notes thereto, each of which is
included in another section of this report.

|                                                                     |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |           | 
|-------------------------------------------------------------------- | ------- | ----------------------- | ---------- | --------- | - | ---- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- |  | - | ------- | --------- | 
|                                                                     |         |                        
|                                                                     |         | Year Ended December 31,
|                                                                     |         |                        
|                                                                     |         | 2002                    |            | 2001      |   | 2000 |           | 1999      |  | 1998
|                                                                     |         |                         |            |           |   |      |           |           |  |     
|Consolidated Statement of Operations
    Data:                       |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|Income from operations                                               |         | $                       | 3,385,335  |           |   | $    | 4,075,248 |           |  | $    | 4,576,814 |           |  | $ | 1,315,373 |           |  | $ | 381,843 |          
|Expenses                                                             |         |                         | 3,140,151  |           |   |      | 2,611,970 |           |  |      | 1,883,868 |           |  |   | 728,322   |           |  |   | 213,437 |          
|                                                                     |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|Income before income taxes                                           |         |                         | 245,184    |           |   |      | 1,463,278 |           |  |      | 2,692,946 |           |  |   | 587,051   |           |  |   | 168,406 |          
|Provision for income taxes                                           |         |                         | 91,541     |           |   |      | 555,298   |           |  |      | 1,018,334 |           |  |   | 301,190   |           |  |   | 62,450  |          
|                                                                     |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|Net income from operations                                           |         |                         | 153,643    |           |   |      | 907,980   |           |  |      | 1,674,612 |           |  |   | 285,861   |           |  |   | 105,956 |          
|Net realized and unrealized gains (losses)                           |         |                         | (2,846,423 | )         |   |      | (263,697  | )         |  |      | (551,912  | )         |  |   | 122,919   |           |  |   | 611,000 |          
|                                                                     |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|Net increase (decrease) in net assets from
    operations            |         | $                       | (2,692,780 | )         |   | $    | 644,283   |           |  |      | 1,122,700 |           |  | $ | 408,780   |           |  | $ | 716,956 |          
|                                                                     |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|Net increase (decrease) in net assets from
    operations per share: |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|                                                                     | Basic   |                         | $          | (.69      | ) |      | $         | .17       |  |      | $         | .38       |  |   | $         | .15       |  |   | $       | .31       | 
|                                                                     | Diluted |                         | $          | (.69      | ) |      | $         | .17       |  |      | $         | .38       |  |   | $         | .15       |  |   | $       | .31       | 
|Weighted average shares:                                             |         |                         |            |           |   |      |           |           |  |      |           |           |  |   |           |           |  |   |         |          
|                                                                     | Basic   |                         |            | 3,921,535 |   |      |           | 3,840,714 |  |      |           | 2,968,018 |  |   |           | 2,682,420 |  |   |         | 2,304,691 | 
|                                                                     | Diluted |                         |            | 3,921,535 |   |      |           | 3,882,914 |  |      |           | 2,968,720 |  |   |           | 2,682,420 |  |   |         | 2,304,691 | 

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|                          |  |              |           |      |  |      |            |      |  |      |            |  |  |   |           |  |  |   |           | 
|------------------------- |  | ------------ | --------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | --------- |  |  | - | --------- | 
|                          |  |             
|                          |  | December 31,
|                          |  |             
|                          |  | 2002         |           | 2001 |  | 2000 |            | 1999 |  | 1998
|                          |  |              |           |      |  |      |            |      |  |     
|Balance Sheet Data:       |  |              |           |      |  |      |            |      |  |      |            |  |  |   |           |  |  |   |           | 
|Investments at fair value |  | $            | 6,208,090 |      |  | $    | 9,988,772  |      |  | $    | 5,949,582  |  |  | $ | 2,594,931 |  |  | $ | 1,300,000 | 
|Cash and cash equivalents |  |              | 745,926   |      |  |      | 1,432,473  |      |  |      | 3,952,280  |  |  |   | 1,007,229 |  |  |   | 418,178   | 
|Total assets              |  |              | 7,863,140 |      |  |      | 12,410,958 |      |  |      | 10,088,666 |  |  |   | 4,205,345 |  |  |   | 1,805,795 | 
|Total liabilities         |  |              | 517,083   |      |  |      | 2,501,518  |      |  |      | 1,633,664  |  |  |   | 920,892   |  |  |   | 440,148   | 
|Net assets                |  |              | 7,346,057 |      |  |      | 9,909,440  |      |  |      | 8,455,002  |  |  |   | 3,284,453 |  |  |   | 1,365,647 | 




Item 7.     Managements
Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion should be read in
conjunction with our financial statements and the notes thereto
included elsewhere in this Form 10-K. This Form 10-K
contains forward-looking statements regarding the plans and
objectives of management for future operations. This information
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 these 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.

Critical Accounting Policies and
Estimates.

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements. On a regular basis, management reviews these
estimates and assumptions including those related to revenue
recognition and the valuation of investments.

Management believes the following critical
accounting policies, among others, affect its more significant
judgments and estimates used in the preparation of its
consolidated financial statements.

Revenue
Recognition

Effective January 1, 2000, the Company
adopted the provisions of SEC Staff Accounting Bulletin 101,
Revenue Recognition in Financial Statements(SAB
101). SAB 101 provides guidance on the recognition,
presentation and disclosures of revenue in financial statements.
The adoption of SAB 101 had no material impact on the
Companys financial statements.

The Company recognizes revenue from the sale of
technology rights upon the exchange of the shares of our
subsidiaries with unrelated merger partners. The Company records
revenue based on the value of the consideration received. In
most cases, the consideration received for the rights is the
common stock of the purchaser. The common stock received is
recorded as an investment at value. Revenue derived from
consulting services is recognized as earned, over the life of
the underlying consulting agreements. Revenue from strategic
alliance agreements is deferred and recognized over the term of
each agreement, typically twelve months. These agreements are
cancelable at any time. In some cases, the Company is paid a fee
for negotiating a successful technology transfer. In these
instances, revenue is recognized upon consummation of the
transaction.

Valuation of
Investments:

The income that we derive from our investments in
our portfolio consists of both cash and equity securities that
we receive upon disposition of our investments. The value of the
equities that we receive makes up most of our revenues. Pursuant
to the requirements of the 1940 Act, our Board of Directors is
responsible

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for determining in good faith the fair value of
our securities and assets for which market quotations are not
readily available. In making its determination, the Board of
Directors may consider valuation appraisals provided by
independent financial experts. With respect to private equity
securities, 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 sale are
generally valued at a discount from the public market value of
the securities.


The Board of Directors bases its determination of
fair value 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.

We have retained Bolten Financial Consulting,
Inc., to provide us with valuations of our investments (the
securities we own), and also updated valuations as of each
quarter end.

Without a readily ascertainable market value, the
value of our portfolio of equity securities may differ
significantly from the values that would be placed on the
portfolio if there existed a ready market for such equity
securities. Any changes in fair value are recorded in the
Companys Statements of Operations as Net realized
and unrealized gains (losses) during the period of change.

General

Our primary business is to make investments in
companies that possess or will likely identify emerging and
established technologies and markets for those technologies. Our
primary investment objective is to increase our net assets by
exchanging stock in our subsidiaries for cash and other assets
we will use to acquire licenses to additional technologies and
fund our operations. We believe that we will be able to achieve
our objectives by concentrating on investments in companies
which we believe are likely to benefit from our
managements expertise in technology transfer.

The income that we derive from our investments in
our portfolio companies consists of both cash and equity
securities that we receive upon disposition of our subsidiaries.
The value of the equities that we receive makes up most of our
revenues. 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. In making its
determination, the Board of Directors may consider valuation
appraisals provided by independent financial experts. With
respect to private equity securities, 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 sale are generally valued at
a discount from the public market value of the securities.

The 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 ascertainable market value, the
value of our portfolio of equity securities may differ
significantly from the values that would be placed on the
portfolio if there existed a ready market for such equity
securities. Any changes in fair value are recorded in the
Companys Statements of Operations as Net realized
and unrealized gains (losses) during the period of change.

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We have retained Bolten Financial Consulting,
Inc., to provide us with valuations of the securities we own,
updated to each quarterly valuation date. We pay Bolten
Financial Consulting, Inc. a fee each time it values our
investments. In 2002, we paid Bolten Financial Consulting, Inc.
a total of $90,232 for its valuation services.

Our expenses include salaries and wages,
professional fees, sales and marketing costs as well as general
and administrative costs. Sales and marketing costs include
license and sponsored research fees, as well as advertising,
commissions, salaries, travel and other expenses that vary with
revenues. General and administrative costs include rent,
depreciation, office, investor relations and other overhead
costs.

We used an equity-based method of compensating
certain outside service providers during 1998 and 1999. Those
costs are reflected in the general and administrative costs of
the statement of operations. Some service agreements were for
periods in excess of one year and any remaining value was
recorded as a prepaid expense for the period.

On October 25, 2000, the Company completed
its IPO of 1,000,000 shares of its common stock at $6.00 per
share to raise additional equity to support its growth strategy.
The net proceeds of the offering were $4,047,849.

Financial Condition

The Companys total assets were $7,863,140
and its net assets were $7,346,057 at December 31, 2002,
compared to $12,410,958 and $9,909,440 at December 31, 2001
respectively.

Net asset value per share (NAV) was
$1.87 at December 31, 2002, compared to $2.53 at
December 31, 2001. Net assets decreased by $2,563,383 in
2002 and increased by $1,454,438 in 2001.

The decrease in total assets, net assets and net
asset value during 2002 were primarily attributable to:



| |   |                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Six technology transfers valued at approximately
    $2.1 million and nine strategic alliance agreements and
    other consulting agreements with earned revenue of approximately
    $1.3 million.
|
| |  | A decline of approximately $3.3 million in
    the value of the Companys investments.                                                                                                             
|
| |  | A loss on sale of approximately $1.2 million
    as a result of sales of the Companys investments.                                                                                                
|
| |  | Sales of the Companys investments of
    approximately $1.6 million.                                                                                                                              
|
| |  | The utilization of approximately
    $1.6 million in cash to fund the Companys operations.                                                                                                        

The Companys common shares outstanding as
of December 31, 2002 were 3,925,672, compared to 3,915,672
at December 31, 2001. The Companys outstanding shares
were increased as a result of the acquisition of TechEx
Acquisition Corporation (TechEx). In May 2002, UTEK
Corporation acquired 100% of the outstanding common stock of
TechEx in a stock for stock transaction. TechEx owned the
TechEx.com website. The TechEx.com website is used by many
technology transfer and research professionals to efficiently
exchange licensing opportunities and innovations available for
partnering.

The Companys financial condition is
dependent on a number of factors including the ability to
effectuate technology transfers and the performance of the
equity securities that we receive for these transfers. The
Company has invested a substantial portion of its assets in
private development stage or start-up companies. These private
businesses are thinly capitalized, unproven, small companies
that lack management depth, are dependent on new, commercially
unproven technologies and have no history of operations. At
December 31, 2002, $5,719,445 or 72.7% of the
Companys total assets consisted of investments at fair
value in thinly traded public companies, of which net unrealized
depreciation, after income tax effect, was $70,334; the
remaining $488,645 or 6.6% of the Companys total assets
consisted of non-publicly traded securities at fair value of
which net unrealized depreciation, after income tax effect, was
$2,021,654. See Note 2 to the Consolidated Financial
Statements under Item 8.

At December 31, 2001, $4,932,861 or 40% of
the Companys total assets consisted of investments at fair
value in thinly traded public companies, of which net unrealized
depreciation, after income tax effect, was

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$18,827; the remaining $5,055,911 or 41% of the
Companys total assets consisted of investments at fair
value in private businesses, of which net unrealized
appreciation, after income tax effect, was $644,294.


The net increase in the value of publicly traded
securities from $4,932,861 to $5,683,896 in 2002 is primarily
due to the following events:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During 2002, the Company completed four
    technology transfer transactions with publicly traded companies.
    Two transactions were completed with FullCircle Registry, Inc.
    that generated $295,347 in initial value, and one transaction
    each with Voice and Wireless Corporation and Circle Group
    Holdings, Inc. that generated $365,962 in combined initial
    value. In addition, the Company entered into six strategic
    alliance or consulting agreements that generated $364,663 in
    initial value. Transactions of this nature result in an increase
    in the value of publicly traded securities.                                                                                                                                                                                                                                                                                                                                                                
|
| |  | During 2002, the Company sold all of its shares
    in Torvec, Inc. and substantially all of its shares in Sense
    Holdings, Inc. In addition, the Company sold a significant
    number of shares representing investments in Centrex, Inc.,
    Advanced Recycling Sciences, Inc., and Clean Water Technologies,
    Inc. As a result of these sales, the value of the publicly
    traded securities decreased by approximately $2.1 million.
    Transactions of this nature result in a decrease in the value of
    publicly traded securities.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | During 2002, the Company experienced an overall
    decline in the fair market value of its publicly traded
    securities. This decline may be attributable to the movement of
    the broad market in general and to the overall economic
    conditions of 2002. In addition, some of the decline in the fair
    market value of the Companys publicly traded securities
    may be attributable to the individual investments themselves.
    Several of the Companys investments experienced
    significant declines in their fair market values due to factors
    that are specific to these investments (inability to obtain
    additional capital, inability to execute their business model,
    termination of their technology licenses, etc.). As a result of
    these conditions, the value of the publicly traded securities
    decreased by approximately $2.7 million. Conditions of this
    nature resulted in a decrease in the value of publicly traded
    securities.
|
| |  | Additionally, Stealth MediaLabs, Inc. (formerly
    BitzMart, Inc.) became a publicly traded company during 2002.
    The Company experienced an increase in the fair market value of
    Stealth MediaLabs, Inc. of approximately $2.7 million,
    inclusive of an additional $50,000 investment we made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

A summary of the Companys investment
portfolio is as follows:

|                                                              |  |              |            |      |  |   |            |  
|------------------------------------------------------------- |  | ------------ | ---------- | ---- |  | - | ---------- | -
|                                                              |  |             
|                                                              |  | December 31,
|                                                              |  |             
|                                                              |  | 2002         |            | 2001
|                                                              |  |              |            |     
|Investments, at cost                                          |  | $            | 9,541,631  |      |  | $ | 10,018,958 |  
|Unrealized appreciation (depreciation), before
    income tax |  |              | (3,333,541 | )    |  |   | (30,186    | )
|                                                              |  |              |            |      |  |   |            |  
|Investments, at fair value                                    |  | $            | 6,208,090  |      |  | $ | 9,988,772  |  
|                                                              |  |              |            |      |  |   |            |  

Following an initial investment in a portfolio
company, the Company may make additional investments in such
portfolio company or subsequent acquirer in order to:
(1) increase its ownership percentage; (2) exercise
warrants or options that were acquired in a prior financing;
(3) preserve the Companys proportionate ownership in
a subsequent financing; (4) transfer additional
technologies to enhance the portfolio companys
intellectual capital or (5) attempt to preserve or enhance
the value of the Companys investment. Such additional
investments are referred to as follow-on
investments. There can be no assurance that the Company will
make follow-on investments or have sufficient funds to make
additional investments. The failure to make such follow-on
investments could jeopardize the viability of the portfolio
company and the Companys investment or could result in a
missed opportunity for the Company to participate to a greater
extent in a portfolio companys successful operations. The
Company attempts to maintain adequate liquid capital to make
follow-on investments in its private portfolio companies.
However there can be no assurance that the Company will have
liquid capital. The Company may elect not to make a follow-on
investment either because it does not want to increase its
concentration of risk, because it prefers other opportunities,
or because it is inhibited by compliance with BDC requirements,
even though the follow-on investment opportunity appears
attractive.

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The following table is a summary of the
Companys capital investments made in its subsidiaries
during the year ended December 31, 2002:

|                                             |       |        |         |         | 
|-------------------------------------------- | ----- | ------ | ------- | ------- | 
|Capital Investments Made in Subsidiaries:    |       | Amount
|                                             |       |       
|Digital Image Enhancement, Inc.(1)           |       | $      | 113,000 |        
|Nitrone Scientific, Inc.(2)                  |       |        | 112,500 |        
|Energy Management Technologies, Inc.(3)      |       |        | 1,000   |        
|Fiber Gel Technologies, Inc.(4)              |       |        | 50,000  |        
|Electronic Luminescent Technologies, Inc.(5) |       |        | 33,123  |        
|Spoken Data Technologies, Inc.(6)            |       |        | 10,000  |        
|                                             |       |        |         |        
|                                             | Total |        | $       | 319,623 | 
|                                             |       |        |         |        






|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Digital Image Enhancement merged with Image
    Analysis, Inc. in May 2001.                                                        
|(2) | Nitrone Scientific, Inc. merged with Prime
    Pharmaceutical, Inc. in May 2002.                                                   
|(3) | Energy Management Technologies, Inc. merged with
    Voice and Wireless Corporation in June 2002.                                  
|(4) | Fiber Gel Technologies, Inc. merged with Circle
    Group Holdings, Inc. (formerly Circle Group Internet, Inc.) in
    August 2002.
|(5) | Electronic Luminescent Technologies, Inc. merged
    with FullCircle Registry, Inc. in June 2002.                                  
|(6) | Spoken Data Technologies, Inc. merged with
    FullCircle Registry, Inc. in September 2002.                                        

Of the total capital invested in our subsidiary
companies during the year ended December 31, 2002, $-0- was
expended on research and development costs, $169,623 was
expended on license and consulting fees, and $150,000 remained
in our subsidiary companies at the time they were sold to our
portfolio companies. All of these items are reflected in the
Consolidated Statement of Operations as sales and marketing
expenses.

Results of Operations

The Company accounts for its operations under
generally accepted accounting principles for investment
companies. On this basis, the principal measure of a
Companys financial performance is the Net increase
in net assets from operations which is the sum of three
elements. The first element is Net income from
operations, which is the difference between the
Companys income from technology transfers, consulting
fees, interest, dividends, fees and other income and its
operating expenses, net of applicable income tax provision. The
second element is Net realized gain (loss) on
investments, which is the difference between the proceeds
received from dispositions of portfolio securities and their
stated cost, net of applicable income tax provision. The third
element, Increase (decrease) in unrealized
appreciation on investments, is the net change in the fair
value of the Companys investment portfolio, net of
increase (decrease) in deferred income taxes that would
become payable if the unrealized appreciation were realized
through the sale or other disposition of the investment
portfolio.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2002 Compared To
    The Year Ended December 31, 2001

Income from
operations.Income from operations
decreased 16.9% to $3,385,335 for the year ended
December 31, 2002 from $4,075,248 for the year months ended
December 31, 2001. The decrease in income from operations
resulted from completing six tax-free mergers, generating an
average of $348,000 per merger in revenue, in 2002 as compared
to four tax-free mergers, generating an average of $855,000 per
merger in revenue, in 2001, partially offset by an increase in
consulting fees of $729,467 related to strategic alliance
agreements. As described below, we completed six tax free
mergers in 2002 in which we received securities valued at
$2,088,254, compared to four tax free mergers in 2001 valued at
$3,419,653.

In 2002, we completed the following transactions:



| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Image Analysis, Inc.We received 465,000 unregistered shares of common stock of Image
    Analysis, Inc. that we valued at the time of the sale at $2.43
    per share in connection with a technology transfer.

36



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| |   |                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Prime Pharmaceutical,
    Inc.We received 683,550 unregistered
    shares of common stock of Prime Pharmaceutical Corporation that
    we valued at the time of the sale at $0.435 per share in
    connection with a technology transfer.                                    
|
| |  | Voice and Wireless
    CorporationWe received 318,750
    unregistered shares of common stock of Voice and Wireless
    Corporation that we valued at the time of the sale at $.094 per
    share in connection with a technology transfer.                                   
|
| |  | FullCircle Registry,
    Inc.We received 68,250 unregistered
    shares of common stock of FullCircle Registry, Inc. that we
    valued at the time of the sale at $2.43 per share in connection
    with a technology transfer.                                              
|
| |  | Circle Group Holdings, Inc. (formerly Circle
    Group Internet, Inc.)We received
    2,800,000 unregistered shares of common stock of Circle Group
    Holdings, Inc. that we valued at the time of the sale at $0.12
    per share in connection with a technology transfer.
|
| |  | FullCircle Registry,
    Inc.We received 157,500 unregistered
    shares of common stock of FullCircle Registry, Inc. that we
    valued at the time of the sale at $0.82 per share in connection
    with a technology transfer.                                             

Consulting fees increased to $1,264,249 in the
year ended December 31, 2002 from $534,782 in the year
ended December 31, 2001. The majority of the fees were paid
in the form of unregistered shares of common stock in our
client; the balance was paid in cash. The increase was a direct
result of the implementation of the strategic alliance
initiative, which began in 2001. To facilitate establishing
on-going consulting engagements with its clients, the Company
has developed a strategic alliance process. UTEKs
strategic alliances are designed to help technology companies
rapidly enhance their new product pipeline through the
acquisition of proprietary intellectual capital from
universities and federal laboratories.

Expenses.Total
operating expenses for the year ended December 31, 2002
were $3,140,151 consisting of salaries and wages of $762,914,
professional fees of $515,164, sales and marketing expenses of
$723,962, and general and administrative expenses of $1,138,111
These expenses compared to the $2,611,970 reported for the year
ended December 31, 2001, consisting of salaries and wages
of $616,796, professional fees of $372,029, sales and marketing
expenses of $904,141, and general and administrative expenses of
$719,004. The 20.2% increase in total operating expenses was
primarily due to expenses incurred in retaining investment
banking firms to potentially raise capital and to sell our
investments, additional expense incurred in the operation of PAX
Technology for a full year in 2002 as compared to three months
in 2001, and an increase in costs associated with being a public
company. The 19.9% decrease in sales and marketing expenses was
largely due to a reduction in the costs associated with
acquisition of technologies that we subsequently transferred and
was partially offset by an increase in the amount paid to
employees to consummate these technology transfers. The 23.7%
increase in salaries and wages reflect additional expenses
incurred in the operation of PAX Technology for a full year in
2002 as compared to three months in 2001. The 38.5% increase in
professional fees is largely due to the increased costs
associated with operating as a public company, reporting
requirements of a public company, preparing the corporate and
subsidiary tax returns, as well as additional attorneys
fees for work related to intellectual property and complying
with BDC regulatory requirements and the increased cost
associated with obtaining quarterly valuation reports for our
increasing number of investments. The 58.3% increase in general
and administrative costs is largely due to the increased
expenses incurred in the operation of PAX Technology for a full
year in 2002 as compared to three months in 2001, expenses
incurred in retaining investment banking firms to potentially
raise capital and to sell our investments and expenses incurred
in listing of the Company on the American Stock Exchange.

37



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Net Realized and Unrealized Gains (Losses) and
Income Taxes.Net realized losses on
investments amounted to $773,262 for the year ended
December 31, 2002 and were substantially related to sales
of:

|                                  |  |                  |           |              |  |   |          |  
|--------------------------------- |  | ---------------- | --------- | ------------ |  | - | -------- | -
|Company Name                      |  | Number Of Shares |           | Loss On Sale
|                                  |  |                  |           |             
|Torvec, Inc.                      |  |                  | 1,068,354 |              |  | $ | (634,806 | )
|Advanced Recycling Sciences, Inc. |  |                  | 223,103   |              |  |   | (67,956  | )
|Clean Water Technologies, Inc.    |  |                  | 57,179    |              |  |   | (6,425   | )
|Centrex, Inc.                     |  |                  | 240,600   |              |  |   | (6,459   | )
|Sense Holdings, Inc.              |  |                  | 1,621,911 |              |  |   | (57,616  | )
|                                  |  |                  |           |              |  |   |          |  
|                                  |  |                  |           |              |  | $ | (773,262 | )
|                                  |  |                  |           |              |  |   |          |  

Net realized losses on investments amounted to
$86,578 for the year ended December 31, 2001 and were
substantially related to sales of 75,027 shares of Lexon, Inc.
common stock for $62,037 in cash during the reporting period.

The net unrealized depreciation of investments,
net of taxes, increased by $2,073,161 for the year ended
December 31, 2002, compared to an unrealized depreciation
of $177,119 for the year ended December 31, 2001. The net
unrealized losses consisted of fluctuations in fair value
resulting from the Board of Directors valuation of the
Companys assets for the year ended December 31, 2002
and 2001. There were declines in value in 2002 related to our
investments in Lexon, Inc., Centrex, Inc., Clean Water
Technologies, Inc., Rosbon, Inc., Torvec, Inc., Advanced
Recycling Sciences, Inc., Sense Holdings, Inc., Palladium
Communications, Inc., Group Management, Inc., Circle Group
Holdings, Inc., Voice and Wireless, Inc., FullCircle Registry,
Inc., Image Analysis, Inc., Graphco Technologies, Inc.,
Primapharm Funding Corporation, Hydrogen Technologies, Inc. and
Prime Pharmaceutical Corporation, Inc. However the decline in
value was partially offset by an increase in value in our
investments in Stealth MediaLabs, Inc. and Innovative Medical
Services, Inc. Stealth MediaLabs, Inc. became a publicly traded
company with a value increase of $2,607,184 for the year ended
December 31, 2002.

The Companys net realized and unrealized
gains (losses) can vary substantially, due to a variety of
factors, therefore, current results may or may not be indicative
of the Companys future performance.

Our effective tax rate was a provision of 37.3%
and 37.9% for the year ended December 31, 2002 and
December 31, 2001, respectively.



| |                                                                               
| | ------------------------------------------------------------------------------
| | Year Ended December 31, 2001 Compared To
    The Year Ended December 31, 2000.

Income from
operations.Income from operations
decreased 11% to $4,075,248 for the year ended December 31,
2001 from $4,576,814 for the year ended December 31, 2000.
The decrease in income from operations resulted from completing
four tax-free mergers in 2001 as compared to four tax-free
mergers and a sale in 2000, partially offset by an increase in
consulting fees of $534,782 related to strategic alliance
agreements. As described below, we completed four tax free
mergers in 2001 in which we received securities valued at
$3,419,653, compared to four tax free mergers and a sale in 2000
valued at $4,501,584.

In 2001, we completed the following transactions:



| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Advanced Recycling Sciences,
    Inc.We received an additional
    1,446,153 shares of common stock of Advanced Recycling Sciences,
    Inc. that were valued at the time of sale at $1.00 per share in
    connection with a technology transfer.
|
| |  | Stealth MediaLabs, Inc. (formerly BitzMart,
    Inc.)We received 450,000 shares of
    common stock of BitzMart, Inc. that were valued at the time of
    sale at $2.31 per share in connection with a technology transfer.                       
|
| |  | Sense Holdings, Inc.We received an additional 1,850,000 shares of common stock of
    Sense Holdings, Inc. that were valued at the time of sale at
    $.26 per share in connection with a technology transfer.                                   

38



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| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Prime Pharmaceutical
    Corporation.We received 560,000
    shares of common stock of Prime Pharmaceutical Corporation that
    were valued at the time of the sale at $.60 per share in
    connection with a technology transfer.

Consulting fees increased to $534,782 in the year
ended December 31, 2001 from $-0- in the year ended
December 31, 2000. The majority of the fees were paid in
the form of unregistered shares of common stock in our client.
The increase was a direct result of the implementation of the
strategic alliance initiative, which began in 2001. To
facilitate establishing on-going consulting engagements with its
clients, the Company has developed a strategic alliance process.
UTEKs strategic alliances are designed to help technology
companies enhance their new product pipeline through the
acquisition of proprietary intellectual capital from
universities and federal laboratories.

Expenses.Total
operating expenses for the year ended December 31, 2001
were $2,611,970 consisting of salaries and wages of $616,796,
professional fees of $372,029, sales and marketing expenses of
$904,141, and general and administrative expenses of $719,004.
These expenses compared to the $1,883,868 reported for the year
ended December 31, 2000, consisting of salaries and wages
of $376,053, professional fees of $309,619, sales and marketing
expenses of $780,670, and general and administrative expenses of
$417,516. The 39% increase in total operating expenses was due
to additional expenses incurred in operating as a public company
for a full year in 2001 as compared to less than three months in
2000, the increased number of employees and outside services
used to grow the business and our ongoing effort to develop the
UTEK U2B® brand. The 16% increase in sales and marketing
expenses was largely due to increased efforts to reach a broader
market for technology transfers, the cost of additional sales
staff, as well as additional research and development programs
funded to consummate those transfers. The 64% increase in
salaries and wages reflects increased salary costs from the
addition of a full-time CFO, an additional part-time employee,
as well as a bonus for our CEO. The 20% increase in professional
fees is largely due to the cost associated with operating as a
public company, preparing the corporate and subsidiary tax
returns, as well as additional attorneys fees for work
related to intellectual property and complying with BDC
regulatory requirements. The 72% increase in general and
administrative costs is largely due to the increased services
required and expenses related to the requirements of being a
public company such as investor relations costs, printing and
mailing costs, and other related costs.

Net Realized and Unrealized Gains (Losses) and
Income Taxes.Net realized losses on
investments amounted to $86,578 for the year ended
December 31, 2001 and were substantially related to sales
of 924,973 shares of Lexon, Inc. common stock for $162,480 and
51,000 shares of Advanced Recycling Sciences, Inc. for $33,135
during the reporting period. The Company also sold various other
short-term investments with net proceeds of $524,728 resulting
in a realized gain of $2,873. Net realized gains on investments
amounted to $23,715 for the year ended December 31, 2000
and were substantially related to sales of 75,027 shares of
Lexon, Inc. common stock for $62,037 in cash during the
reporting period.

The net unrealized appreciation (depreciation) of
investments, net of taxes, increased by $177,119 for the year
ended December 31, 2001, a 69% decrease from the decrease
in unrealized appreciation of $575,627 for the year ended
December 31, 2000. The net unrealized losses consisted of
fluctuations in fair value resulting from the Board of
Directors valuation of the Companys assets for the
year ended December 31, 2001. There were declines in value
related to our investments in Lexon, Inc., Nubar, Inc.,
NuElectric Corporation, Rosbon, Inc., Torvec, Inc. and Prime
Pharmaceutical Corporation, Inc. However the decline in value
was offset by an increase in value in our investments in Image
Analysis, Inc., Centrex, Inc., Advanced Recycling Sciences,
Inc., BitzMart, Inc. and Sense Holdings, Inc. Centrex, Inc.
became a publicly traded company with a value increase of
$1,552,320 for the year ended December 31, 2001.

The Companys net realized and unrealized
gains (losses) can vary substantially, due to a variety of
factors, therefore, current results may or may not be indicative
of the Companys future performance.

Our effective tax rate was a provision of 37.9%
and 37.8% for the year ended December 31, 2001 and
December 31, 2000, respectively.

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Liquidity and Capital Resources

Net assets decreased 25.9% to $7,346,057 at
December 31, 2002 from $9,909,440 at December 31,
2001, attributable to a decline in income from operations,
realized losses, and primarily from the unrealized depreciation
of non-controlled affiliate investments.

Our primary source of liquidity and capital
through December 31, 2002 was from the sale of investments
and the issuance of common stock rather than income from
operations. Our income from operations consists primarily of the
sale of technology rights for equity securities rather than
cash. Since inception, we have completed four private placement
transactions resulting in proceeds of $375,617 in 2001,
$1,305,807 in 1999 and $530,453 in 1998. In 2000, we completed
the Companys IPO with net proceeds of $4,047,849.

On September 10, 2001, the Company secured a
$500,000 revolving line of credit with a local financial
institution. During 2002, the Company elected to not renew its
line of credit based upon the terms of the renewal it received
from the lender. Under the terms provided by the lender, the
Company would have had to pledge a number of its investments as
collateral for the line of credit. As such, these investments
would have been unavailable for sale in the open market. The
Company felt it was more advantageous to sell these securities
in the open market and accordingly did not renew its line of
credit.

On December 31, 2002 we had $745,926 in cash
and cash equivalents. The Company has incurred net losses in
2002 and negative cash flows from operations for the past
several years. Recently, management has made reductions in its
staffing and operating costs to further streamline its costs.
Management believes that the cash on hand, combined with the
proceeds from sales of investments which are or will become
freely tradable in 2003 due to the expiration of various
restrictions, combined with a commitment for approximately
$247,000 in debt and equity will be sufficient to allow the
Company to continue as a going concern for at least a year.

The commitment, which was obtained on
March 20, 2003 provides for a third party to sell 20,000
shares of restricted UTEK common stock at $3 per share and to
loan UTEK $200,000 for a two-year period. The loan will be
secured by 72,000 unregistered shares of UTEK common stock. The
third party, who will earn a fee for this placement, has also
committed that they will purchase the shares and advance the
funds to UTEK under the same terms if they are unable to find a
buyer and/or lender. The closing is expected to be on or before
April 30, 2003.

During 2002, the Company sought to raise cash
through the issuance of its common stock in a private placement,
but was unsuccessful in doing so on terms it found acceptable.
Raising additional monies beyond the $247,000 commitment may be
difficult, if it becomes necessary.

If we are unable to raise sufficient cash
through the issuance of either debt or equity instruments, we
may have to curtail operations, or change our business model to
gain access to additional sources of cash.

Recent Developments

In February of 2002, Advanced Recycling Sciences,
Inc. notified the Company that Advanced Recycling Sciences, Inc.
had issued instructions to its transfer agent that effectively
prevents the Company from selling at least the majority if not
all of the shares of Advanced Recycling Sciences, Inc. that it
holds. This action was taken as a result of a dispute that
exists between Advanced Recycling Sciences, Inc. and licensor of
certain technology to Advanced Recycling Sciences, Inc. The
Company is not a party to this license dispute; however,
Advanced Recycling Sciences, Inc. did acquire the disputed
license in a transaction with the Company.

The Company intends to pursue all remedies
available to it in order to resume the sale of its investment in
Advanced Recycling Sciences, Inc. There can be no assurance that
the Company will be successful in its

40



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efforts to resume the sale of its investment in
Advanced Recycling Sciences, Inc. A failure to resume the sale
of the Companys investment in Advanced Recycling Sciences,
Inc. would have a material adverse impact on the Companys
financial condition and results of operations.


On March 7, 2003 the Company announced that
The Chief Financial Officer, Michael O. Sullivan, CPA will leave
on March 21, 2003 to pursue other interests; and that
Carole R. Wright, CPA, UTEKs Controller and Corporate
Secretary, will serve as CFO beginning March 22, 2003.






| |                                                                           
| | --------------------------------------------------------------------------
| | Item 7A.     Quantitative
    and Qualitative Disclosure About Market Risk

The Companys business activities contain
elements of risk. The Company considers a principal type of
market risk to be valuation risk. Investments are stated at
fair value as defined in the 1940 Act and in the
applicable regulations of the SEC. All assets are valued at fair
value as determined in good faith by, or under the direction of,
the Board of Directors. See Investments in the notes
to Consolidated Financial Statements.

Neither the Companys investments nor an
investment in the Company is intended to constitute a balanced
investment program. The Company has exposure to public-market
price fluctuations to the extent of its publicly traded
portfolio.

The Company has invested a substantial portion of
its assets in private development stage or start-up companies.
These private businesses tend to be thinly capitalized,
unproven, small companies that lack management depth and have
not attained profitability or have no history of operations.
Because of the speculative nature and the lack of public market
for these investments, there is significantly greater risk of
loss than is the case with traditional investment securities.
The Company expects that some of its investments will be a
complete loss or will be unprofitable and that some will appear
to be likely to become successful but never realize their
potential.

Because there is typically no public market for
the equity interests of the small companies in which the Company
invests, the valuation of the equity interests in the
Companys portfolio is determined by the Companys
Board of Directors in accordance with the Companys Asset
Valuation Policy Guidelines. In the absence of a readily
ascertainable market value, the value of the Companys
portfolio of equity interests may differ significantly from the
values that would be placed on the portfolio if a ready market
for the equity interests existed. Any changes in valuation are
recorded in the Companys consolidated statements of
operations as Net increase (decrease) in unrealized
appreciation of non-controlled affiliate investments in
the period of change.

41



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##### Table of Contents








|         |                                                
|-------- | -----------------------------------------------
|Item  8. | Financial Statements and Supplementary
    Data

UTEK CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
SCHEDULES


|                                                                                                          |  |      |    | 
|--------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Documents                                                                                                 |  | Page
|                                                                                                          |  |     
|Report of Independent Certified Public Accountants                                                        |  |      | 43 | 
|Consolidated Balance Sheets at December 31,
    2002 and 2001                                             |  |      | 44 | 
|Consolidated Statements of Operations for the
    years ended December 31, 2002, 2001 and 2000            |  |      | 45 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2002, 2001 and 2000            |  |      | 46 | 
|Consolidated Statements of Changes in Net Assets
    for the years ended December 31, 2002, 2001 and 2000 |  |      | 47 | 
|Schedule of Investments at December 31, 2002
    and 2001                                                 |  |      | 48 | 
|Notes to Consolidated Financial Statements                                                                |  |      | 52 | 
|Selected Per Share Data and Ratios for the years
    ended December 31, 2002, 2001, 2000, 1999, 1998      |  |      | 64 | 

42



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##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

Board of Directors and Shareholders

UTEK Corporation


We have audited the accompanying consolidated
balance sheets of UTEK Corporation, including the schedules of
investments, as of December 31, 2002 and 2001, and the
related consolidated statements of operations, cash flows, and
changes in net assets for each of the three years in the period
ended December 31, 2002, and selected per share data and
ratios for each of the five years in the period ended
December 31, 2002. These consolidated financial statements
and selected per share data and ratios are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements and selected per share
data and ratios based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements and per share data and ratios are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included the physical inspection of
securities owned as of December 31, 2002 and 2001. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements and selected per share data and ratios referred to
above present fairly, in all material respects, the consolidated
financial position of UTEK Corporation at December 31, 2002 and
2001, and the consolidated results of its operations, its cash
flows and changes in its net assets for each of the three years
in the period ended December 31, 2002, and the selected per
share data and ratios for each of the five years in the period
ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.



| |                      
| | ---------------------
| | /S/ ERNST & YOUNG LLP

Tampa, Florida

February 19, 2003


except for Note 12 as to which


the date is March 20, 2003


43



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##### Table of Contents



UTEK CORPORATION

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |           |           |            | 
|------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------- | ------------ | ---------- | --------- | --------- | --------- | --------- | ---------- | 
|                                                                                                                                            |                                                                                                                                                                                                       | December 31,                                                                 |                           | December 31,
|                                                                                                                                            |                                                                                                                                                                                                       | 2002                                                                         |                           | 2001        
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |             
|ASSETS                                                                                                                                      |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|Investments in non-controlled affiliates (cost
    $9,541,631 and $10,018,958 at December 31, 2002 and
    December 31, 2001, respectively) |                                                                                                                                                                                                       | $                                                                            | 6,208,090                 |              |            | $         | 9,988,772 |          
|Cash and cash equivalents                                                                                                                   |                                                                                                                                                                                                       |                                                                              | 745,926                   |              |            |           | 1,432,473 |          
|Short-term marketable securities                                                                                                            |                                                                                                                                                                                                       |                                                                              |                          |              |            |           | 282,284   |          
|Prepaid expenses and other assets                                                                                                           |                                                                                                                                                                                                       |                                                                              | 308,722                   |              |            |           | 192,450   |          
|Fixed assets, net                                                                                                                           |                                                                                                                                                                                                       |                                                                              | 65,255                    |              |            |           | 88,286    |          
|                                                                                                                                            | Intangible assets                                                                                                                                                                                     |                                                                              |                           | 535,147      |            |           |           | 426,693   |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              | TOTAL ASSETS              |              |            | 7,863,140 |           |           |           | 12,410,958 | 
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|LIABILITIES                                                                                                                                 |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|Accrued expenses                                                                                                                            |                                                                                                                                                                                                       |                                                                              | 126,947                   |              |            |           | 90,125    |          
|Income taxes payable                                                                                                                        |                                                                                                                                                                                                       |                                                                              | 16,781                    |              |            |           |          |          
|Deferred revenue                                                                                                                            |                                                                                                                                                                                                       |                                                                              | 127,766                   |              |            |           | 523,406   |          
|Deferred income taxes                                                                                                                       |                                                                                                                                                                                                       |                                                                              | 245,589                   |              |            |           | 1,887,987 |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              | TOTAL LIABILITIES         |              |            | 517,083   |           |           |           | 2,501,518  | 
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              | NET ASSETS                |              | $          | 7,346,057 |           |           | $         | 9,909,440  | 
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|Commitments and Contingencies                                                                                                               |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|Composition of net assets:                                                                                                                  |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|                                                                                                                                            | Common stock, $.01 par value, 19,000,000 shares
    authorized; 3,925,672 shares issued and outstanding at
    December 31, 2002 and 3,915,672 shares issued and
    outstanding at December 31, 2001 |                                                                              | $                         | 39,257       |            |           | $         | 39,157    |          
|                                                                                                                                            | Preferred stock, $.01 par value, 1,000,000 shares
    authorized; none issued and outstanding                                                                                                         |                                                                              |                           |             |            |           |           |          |          
|                                                                                                                                            | Additional paid in capital                                                                                                                                                                            |                                                                              |                           | 7,058,941    |            |           |           | 6,988,141 |          
|                                                                                                                                            | Accumulated income:                                                                                                                                                                                   |                                                                              |                           |              |            |           |           |           |          
|                                                                                                                                            |                                                                                                                                                                                                       | Accumulated net operating income                                             |                           |              | 3,122,937  |           |           |           | 2,969,294 |           
|                                                                                                                                            |                                                                                                                                                                                                       | Net realized loss on investments, net of income
    taxes                    |                           |              | (836,125   | )         |           |           | (62,863   | )         
|                                                                                                                                            |                                                                                                                                                                                                       | Net unrealized depreciation of investments, net
    of deferred income taxes |                           |              | (2,091,988 | )         |           |           | (18,827   | )         
|                                                                                                                                            |                                                                                                                                                                                                       | Foreign currency translation adjustment                                      |                           |              | 53,035     |           |           |           | (5,462    | )         
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              | Net assets                |              | $          | 7,346,057 |           |           | $         | 9,909,440  | 
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              | Net asset value per share |              | $          | 1.87      |           |           | $         | 2.53       | 
|                                                                                                                                            |                                                                                                                                                                                                       |                                                                              |                           |              |            |           |           |          

See accompanying notes

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UTEK CORPORATION

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |           |           | 
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ---------- | ---------- | ------- | ---- | --------- | --------- | ------- | - | --------- | --------- | --------- | 
|                                                                     |                                                                                                                                                                                                                                      |                           
|                                                                     |                                                                                                                                                                                                                                      | Year ended December 31    
|                                                                     |                                                                                                                                                                                                                                      |                           
|                                                                     |                                                                                                                                                                                                                                      | 2002                       |            | 2001       |         | 2000
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |     
|Income from operations:                                              |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     | Sale of technology rights                                                                                                                                                                                                            |                            | $          | 2,088,254  |         |      | $         | 3,419,653 |         |   | $         | 4,501,584 |          
|                                                                     | Consulting and other services                                                                                                                                                                                                        |                            |            | 1,264,249  |         |      |           | 534,782   |         |   |           |          |          
|                                                                     | Investment income, net                                                                                                                                                                                                               |                            |            | 32,832     |         |      |           | 120,813   |         |   |           | 75,230    |          
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     |                                                                                                                                                                                                                                      |                            | 3,385,335  |            |         |      | 4,075,248 |           |         |   | 4,576,814 |          
|Expenses:                                                            |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     | Salaries and wages                                                                                                                                                                                                                   |                            |            | 762,914    |         |      |           | 616,796   |         |   |           | 376,053   |          
|                                                                     | Professional fees                                                                                                                                                                                                                    |                            |            | 515,164    |         |      |           | 372,029   |         |   |           | 309,619   |          
|                                                                     | Sales and marketing                                                                                                                                                                                                                  |                            |            | 723,962    |         |      |           | 904,141   |         |   |           | 780,670   |          
|                                                                     | General and administrative                                                                                                                                                                                                           |                            |            | 1,138,111  |         |      |           | 719,004   |         |   |           | 417,526   |          
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     |                                                                                                                                                                                                                                      |                            | 3,140,151  |            |         |      | 2,611,970 |           |         |   | 1,883,868 |          
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|Income before income taxes                                           |                                                                                                                                                                                                                                      |                            | 245,184    |            |         |      | 1,463,278 |           |         |   | 2,692,946 |          
|Provision for income taxes                                           |                                                                                                                                                                                                                                      |                            | 91,541     |            |         |      | 555,298   |           |         |   | 1,018,334 |          
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     |                                                                                                                                                                                                                                      | Net income from operations |            |            | 153,643 |      |           |           | 907,980 |   |           |           | 1,674,612 | 
|Net realized and unrealized gains
    (losses):                      |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     | Net realized gain (loss) on investments, net of
    income tax expense (benefit) of $(466,536), $(52,236) and
    $14,312 for 2002, 2001 and 2000, respectively                                                                      |                            |            | (773,262   | )       |      |           | (86,578   | )       |   |           | 23,715    |          
|                                                                     | Change in unrealized appreciation (depreciation)
    of non-controlled affiliate investments, net of deferred tax
    expense (benefit) of $(1,250,811), $(106,681) and
    $(347,298) for 2002, 2001 and 2000 respectively (Note 4) |                            |            | (2,073,161 | )       |      |           | (177,119  | )       |   |           | (575,627  | )        
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|Net increase (decrease) in net assets from
    operations            |                                                                                                                                                                                                                                      | $                          | (2,692,780 | )          |         | $    | 644,283   |           |         | $ | 1,122,700 |          
|                                                                     |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|Net increase (decrease) in net assets from
    operations per share: |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     | Basic                                                                                                                                                                                                                                |                            | $          | (.69       | )       |      | $         | .17       |         |   | $         | .38       |          
|                                                                     | Diluted                                                                                                                                                                                                                              |                            | $          | (.69       | )       |      | $         | .17       |         |   | $         | .38       |          
|Weighted average shares:                                             |                                                                                                                                                                                                                                      |                            |            |            |         |      |           |           |         |   |           |          
|                                                                     | Basic                                                                                                                                                                                                                                |                            |            | 3,921,535  |         |      |           | 3,840,714 |         |   |           | 2,968,018 |          
|                                                                     | Diluted                                                                                                                                                                                                                              |                            |            | 3,921,535  |         |      |           | 3,882,914 |         |   |           | 2,968,720 |          

See accompanying notes

45



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UTEK CORPORATION

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(UNAUDITED)


|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |           |            |         |            |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------- | --------------------------------- | ------------------------------------------------------- | ---------- | -------- | ---------- | ---------- | ---------- | -------- | ---------- | --------- | ---------- | ------- | ---------- | -
|                                                              |                                                                                                                                      |                                                                      
|                                                              |                                                                                                                                      | Year Ended December 31                                               
|                                                              |                                                                                                                                      |                                                                      
|                                                              |                                                                                                                                      | 2002                                                                  |                                   | 2001                                                    |            | 2000    
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |         
|Operating Activities:                                         |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              | Net (decrease) in net assets from operations                                                                                         |                                                                       | $                                 | (2,692,780                                              | )          |          | $          | 644,283    |            |          | $          | 1,122,700 |           
|                                                              | Adjustments to reconcile net increase (decrease)
    in net assets from operations to net cash provided by operating
    activities: |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |           |           
|                                                              |                                                                                                                                      | (Increase) decrease in net unrealized
    depreciation of investments |                                   |                                                         | 3,415,355  |          |            |            | 283,980    |          |            |           | 922,925    |        
|                                                              |                                                                                                                                      | Depreciation                                                          |                                   |                                                         | 35,657     |          |            |            | 23,297     |          |            |           | 19,251     |        
|                                                              |                                                                                                                                      | Loss on disposal of fixed asset                                       |                                   |                                                         | 1,024      |          |            |            |           |          |            |           |           |        
|                                                              |                                                                                                                                      | (Gain) loss on sale of investments                                    |                                   |                                                         | 1,215,050  |          |            |            | 138,814    |          |            |           | (38,027    | )      
|                                                              |                                                                                                                                      | Deferred income taxes                                                 |                                   |                                                         | (1,642,398 | )        |            |            | 396,199    |          |            |           | 685,349    |        
|                                                              |                                                                                                                                      | Investment securities received for sale of
    portfolio companies    |                                   |                                                         | (2,200,254 | )        |            |            | (3,419,653 | )        |            |           | (4,301,585 | )      
|                                                              |                                                                                                                                      | Services rendered in exchange for investment
    securities           |                                   |                                                         | (633,420   | )        |            |            | (453,635   | )        |            |           |           |        
|                                                              | Changes in operating assets and liabilities:                                                                                         |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |           |           
|                                                              |                                                                                                                                      |                                                                       | Prepaid expenses and other assets |                                                         |            | (162,098 | )          |            |            | (117,032 | )          |           |            | 36,754  |           
|                                                              |                                                                                                                                      |                                                                       | Income taxes payable              |                                                         |            | 16,781   |            |            |            |         |            |           |            |        |           
|                                                              |                                                                                                                                      |                                                                       | Deferred revenue                  |                                                         |            | 32,332   |            |            |            | 27,008   |            |           |            |        |           
|                                                              |                                                                                                                                      |                                                                       | Accrued expenses                  |                                                         |            | 36,822   |            |            |            | (11,776  | )          |           |            | (12,552 | )         
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              |                                                                                                                                      |                                                                       |                                   | Net cash used in operating activities                   |            |          | (2,577,929 | )          |            |          | (2,488,515 | )         |            |         | (1,565,185 | )
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|Investing Activities:                                         |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              | Proceeds received on sale of investments                                                                                             |                                                                       |                                   | 1,888,263                                               |            |          |            | 5,049,343  |            |          |            | 62,037    |           
|                                                              | Purchase of investment securities                                                                                                    |                                                                       |                                   | (50,000                                                 | )          |          |            | (5,411,844 | )          |          |            |          |           
|                                                              | Cash acquired in acquisition of PAX Technology
    Transfer Ltd.                                                                     |                                                                       |                                   |                                                        |            |          |            | 27,533     |            |          |            |          |           
|                                                              | Purchases of fixed assets                                                                                                            |                                                                       |                                   | (5,378                                                  | )          |          |            | (26,504    | )          |          |            | (14,987   | )         
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              |                                                                                                                                      |                                                                       |                                   | Net cash provided by (used in) investing
    activities |            |          | 1,832,885  |            |            |          | (361,472   | )         |            |         | 47,050     |  
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|Financing Activities:                                         |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              | Proceeds from short term borrowings                                                                                                  |                                                                       |                                   |                                                        |            |          |            | 150,000    |            |          |            | 140,975   |           
|                                                              | Repayments on short-term borrowings                                                                                                  |                                                                       |                                   |                                                        |            |          |            | (189,975   | )          |          |            | (101,000  | )         
|                                                              | Net proceeds from issuance of common stock                                                                                           |                                                                       |                                   |                                                        |            |          |            | 375,617    |            |          |            | 4,423,181 |           
|                                                              | Net proceeds from issuance of common stock
    warrants                                                                              |                                                                       |                                   |                                                        |            |          |            |           |            |          |            | 30        |           
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              |                                                                                                                                      |                                                                       |                                   | Net cash provided by financing activities               |            |          |           |            |            |          | 335,642    |           |            |         | 4,463,186  |  
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|Foreign currency translation adjustment                       |                                                                                                                                      |                                                                       | 58,497                            |                                                         |            |          | (5,462     | )          |            |          |           |          
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|Decrease in cash and cash equivalents                         |                                                                                                                                      |                                                                       | (686,547                          | )                                                       |            |          | (2,519,807 | )          |            |          | 2,945,051  |          
|Cash and cash equivalents at end of period                    |                                                                                                                                      | $                                                                     | 745,926                           |                                                         |            | $        | 1,432,473  |            |            | $        | 3,952,280  |          
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|Supplemental Disclosures of Non-Cash Investing
    Activities |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              | Acquisition of Techex Acquisition Corporation                                                                                        |                                                                       | $                                 | 70,900                                                  |            |          | $          |           |            |          | $          |          |           
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              | Acquisition of PAX Technology Transfer Ltd, net
    of cash acquired                                                                 |                                                                       | $                                 |                                                        |            |          | $          | 412,606    |            |          | $          |          |           
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          
|                                                              | Stock received in settlement of receivable                                                                                           |                                                                       | $                                 |                                                        |            |          | $          | 39,614     |            |          | $          |          |           
|                                                              |                                                                                                                                      |                                                                       |                                   |                                                         |            |          |            |            |            |          |            |          

See accompanying notes

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UTEK CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET
ASSETS

|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |           |           | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------ | --------------------------------------------------------- | ---------- | ---------- | ---------- | ---- | --------- | -------- | --------- |  | --------- | --------- | --------- | 
|                                           |                                                                                                        |                                                          
|                                           |                                                                                                        | Year ended December 31                                   
|                                           |                                                                                                        |                                                          
|                                           |                                                                                                        | 2002                                                      |            | 2001       |            | 2000
|                                           |                                                                                                        |                                                           |            |            |            |     
|Changes in net assets from
    operations: |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|                                           | Net income from operations                                                                             |                                                           | $          | 153,643    |            |      | $         | 907,980  |           |  | $         | 1,674,612 |          
|                                           | Net realized gain (loss) on sale of investments                                                        |                                                           |            | (773,262   | )          |      |           | (86,578  | )         |  |           | 23,715    |          
|                                           | Change in net unrealized appreciation
    (depreciation) of investments, net of related deferred taxes |                                                           |            | (2,073,161 | )          |      |           | (177,119 | )         |  |           | (575,627  | )        
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|                                           |                                                                                                        | Net increase (decrease) in net assets from
    operations |            |            | (2,692,780 | )    |           |          | 644,283   |  |           |           | 1,122,700 | 
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|Capital stock transactions:                |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|                                           | Common stock issued for cash                                                                           |                                                           |            |           |            |      |           | 375,617  |           |  |           | 4,047,819 |          
|                                           | Common stock warrants issued for cash                                                                  |                                                           |            |           |            |      |           |         |           |  |           | 30        |          
|                                           | Common stock issued in acquisition of PAX
    Technology Transfer Ltd.                                 |                                                           |            |           |            |      |           | 440,000  |           |  |           |          |          
|                                           | Common stock issued in acquisition of Techex
    Acquisition Corporation                               |                                                           |            | 70,900     |            |      |           |         |           |  |           |          |          
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|                                           |                                                                                                        | Net increase in net assets from stock transactions        |            |            | 70,900     |      |           |          | 815,617   |  |           |           | 4,047,849 | 
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|Foreign currency translation adjustment    |                                                                                                        |                                                           | 58,497     |            |            |      | (5,462    | )        |           |  |          |          
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|Net increase (decrease) in net assets      |                                                                                                        |                                                           | (2,563,383 | )          |            |      | 1,454,438 |          |           |  | 5,170,549 |          
|Net assets at beginning of year            |                                                                                                        |                                                           | 9,909,440  |            |            |      | 8,455,002 |          |           |  | 3,284,453 |          
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          
|                                           |                                                                                                        | Net assets at end of year                                 |            | $          | 7,346,057  |      |           | $        | 9,909,440 |  |           | $         | 8,455,002 | 
|                                           |                                                                                                        |                                                           |            |            |            |      |           |          |           |  |           |          

See accompanying notes

47



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##### Table of Contents



UTEK CORPORATION

Schedule of Investments

December 31, 2002


| |  |        |           |             |  |  |       |          |  |                                                                                                                                                         |  |   |           |  |  |   |           | 
| |  | ------ | --------- | ----------- |  |  | ----- | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  |  | - | --------- | 
| |  |        |           | Original    |  |  |       |          |  |                                                                                                                                                        
| |  |        |           | Date of     |  |  |       | Original |  | Fair                                                                                                                                                   
| |  | Shares |           | Acquisition |  |  |       | Cost     |  | Value                                                                                                                                                  
| |  |        |           |             |  |  |       |          |  |                                                                                                                                                        
| |  |        |           |             |  |  |       |          |  | Common stock in non-controlled
    affiliates  84.5%                                                                                                   |  |   |           |  |  |   |           | 
| |  |        |           |             |  |  |       |          |  | of net assets                                                                                                                                           |  |   |           |  |  |   |           | 
| |  |        | 236,000   |             |  |  | 3/01  |          |  | Lexon, Inc.,publicly traded over the
    counter  0%; developer of health care technology                                                              |  | $ | 39,614    |  |  | $ |          | 
| |  |        | 1,344,300 |             |  |  | 1/99  |          |  | Image Analysis, Inc.,privately held  0%; medical
    and hospital equipment developer                                                                  |  |   | 1,349,775 |  |  |   |          | 
| |  |        | 1,343,400 |             |  |  | 5/99  |          |  | Centrex, Inc.,publicly traded over the
    counter  3.5%; developer of water and purification
    methodologies                                        |  |   | 443,322   |  |  |   | 255,246   | 
| |  |        | 900,000   |             |  |  | 5/99  |          |  | Nubar, Inc.,privately held  0%;
    developer of construction materials                                                                                |  |   | 126,000   |  |  |   |          | 
| |  |        | 980,778   |             |  |  | 6/99  |          |  | Clean Water Technologies, Inc. (formerly
    NuElectric Corporation),publicly
    traded over the counter  .6%; environmental services.                |  |   | 573,806   |  |  |   | 45,116    | 
| |  |        | 150       |             |  |  | 11/99 |          |  | Rosbon, LLC (formerly Rosbon, Inc.),privately held  1.0%; real
    estate development                                                                  |  |   | 90,705    |  |  |   | 76,451    | 
| |  |        | 100,799   |             |  |  | 3/00  |          |  | Graphco Technologies, Inc.,privately held  2.8%;
    developer of e-commerce technologies                                                              |  |   | 952,551   |  |  |   | 207,646   | 
| |  |        | 2,103,053 |             |  |  | 6/00  |          |  | Advanced Recycling Sciences, Inc. (formerly
    The Quantum Group, Inc.)publicly
    traded over the counter  3.1%; tire recycling
    methodologies   |  |   | 1,978,242 |  |  |   | 231,336   | 
| |  |        | 4,221,165 |             |  |  | 4/01  |          |  | Stealth MediaLabs, Inc.(formerly BitzMart, Inc.) publicly
    traded over the counter  62.5%; software products                                        |  |   | 1,708,000 |  |  |   | 4,586,435 | 
| |  |        | 228,089   |             |  |  | 5/01  |          |  | Sense Holdings, Inc.,publicly traded over the
    counter  1.0%; biometric technologies                                                                |  |   | 59,303    |  |  |   | 70,708    | 
| |  |        | 1,493,550 |             |  |  | 9/01  |          |  | Prime Pharmaceutical Corporation,privately held  1.4%;
    pharmaceutical developments in dermatology                                                  |  |   | 783,344   |  |  |   | 104,548   | 
| |  |        | 1,000,000 |             |  |  | 11/01 |          |  | Primapharm Funding Corporation,privately held  1.4%;
    intellectual property development                                                             |  |   | 393,001   |  |  |   | 100,000   | 
| |  |        | 400,000   |             |  |  | 11/01 |          |  | Palladium Communications, Inc. (formerly
    USAOnestar.Net Inc.), publicly traded
    over the counter  0%; telecom, educational internet
    service |  |   | 12,028    |  |  |   |          | 
| |  |        | 47,615    |             |  |  | 1/02  |          |  | Group Management Corporation,publicly traded over the
    counter  0%; corporate management                                                            |  |   | 46,949    |  |  |   |          | 
| |  |        | 2,844,000 |             |  |  | 1/02  |          |  | Circle Group Holdings, Inc. (formerly Circle
    Group Internet, Inc.),publicly traded
    over the counter, digital design and consulting  .8%;       |  |   | 358,102   |  |  |   | 59,724    | 
| |  |        | 633,750   |             |  |  | 2/02  |          |  | Voice and Wireless Corporation,publicly traded over the
    counter,  .2%; internet/technology services and
    products                               |  |   | 53,161    |  |  |   | 13,942    | 
| |  |        | 48,000    |             |  |  | 4/02  |          |  | Hydrogen Technology Applications, Inc.,privately held,  0%;
    developer of energy technology                                                         |  |   | 14,040    |  |  |   |          | 
| |  |        | 486,750   |             |  |  | 6/02  |          |  | FullCircle Registry, Inc.,publicly traded over the
    counter,  5.6%; developer of emergency information
    technology                               |  |   | 519,803   |  |  |   | 413,738   | 
| |  |        | 120,000   |             |  |  | 9/02  |          |  | Innovative Medical Services, Inc.,publicly traded over the
    counter,  .6% developer of anti-microbial technology                                    |  |   | 39,885    |  |  |   | 43,200    | 
| |  |        |           |             |  |  |       |          |  |                                                                                                                                                         |  |   |           |  |  |   |           | 
| |  |        |           |             |  |  |       |          |  | TOTAL INVESTMENTS  84.5%                                                                                                                               |  | $ | 9,541,631 |  |  | $ | 6,208,090 | 
| |  |        |           |             |  |  |       |          |  |                                                                                                                                                         |  |   |           |  |  |   |           | 
| |  |        |           |             |  |  |       |          |  | Cash and other assets, less
    liabilities  15.5%                                                                                                     |  |   |           |  |  |   | 1,137,967 | 
| |  |        |           |             |  |  |       |          |  |                                                                                                                                                         |  |   |           |  |  |   |           | 
| |  |        |           |             |  |  |       |          |  | Net assets at December 31, 2002  100%                                                                                                                  |  |   |           |  |  | $ | 7,346,057 | 
| |  |        |           |             |  |  |       |          |  |                                                                                                                                                         |  |   |           |  |  |   |           | 

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Notes to Schedule of Investments:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The above investments with the exception of
    Rosbon, LLC 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 ascertainable 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 financial expert. (See Notes 1 and 2 to
    the consolidated financial statements).                                                                                                                                                                                                                                                                                                                         
|
| |  | As of December 31, 2002, all of the
    securities that we own are restricted securities, as
    that term is defined under Rule 144 of the Securities Act
    of 1933. These securities may not be sold in the absence of
    registration under the Securities Act of 1933 or an exemption
    therefrom. As a result, our ability to sell or otherwise
    transfer the securities we hold in our portfolio is limited.                                                                                                                                                                                                                                                               
|
| |  | The Company owns more than 10% of the outstanding
    common stock of each of the above investments with the exception
    of Full Circle Registry, Inc., Centrex, Inc., Graphco
    Technologies, Inc., Prime Pharmaceutical Corporation, Lexon,
    Inc., Voice and Wireless Corporation, Palladium Communications,
    Inc., Hydrogen Technology Applications, Inc. Innovative Medical
    Services, Inc., Sense Holdings, Inc., Advanced Recycling
    Sciences, Inc. and Group Management Corporation. As such, the
    Company is deemed to be an affiliate of these companies, as
    defined under Rule 144 of the Securities Act of 1933,
    except for those specifically noted.

See accompanying notes

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UTEK CORPORATION

Schedule of Investments

December 31, 2001


|       |           |             |  |  |       |          |  |                                                                                                                                                      |  |   |            |  |  |   |           |  
|------ | --------- | ----------- |  |  | ----- | -------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- |  |  | - | --------- | -
|       |           | Original    |  |  |       |          |  |                                                                                                                                                     
|       |           | Date of     |  |  |       | Original |  | Fair                                                                                                                                                
|Shares |           | Acquisition |  |  |       | Cost     |  | Value                                                                                                                                               
|       |           |             |  |  |       |          |  |                                                                                                                                                     
|       |           |             |  |  |       |          |  | Common stock in non-controlled
    affiliates  100.8%                                                                                               |  |   |            |  |  |   |           |  
|       |           |             |  |  |       |          |  | of net assets                                                                                                                                        |  |   |            |  |  |   |           |  
|       | 236,000   |             |  |  | 3/01  |          |  | Lexon,
    Inc. publicly traded over
    the counter  .2%; developer of health care technology                                                     |  | $ | 39,614     |  |  | $ | 21,240    |  
|       | 879,300   |             |  |  | 1/99  |          |  | Image Analysis, Inc.,privately held  17.2%;
    medical and hospital equipment developer                                                            |  |   | 219,825    |  |  |   | 1,705,842 |  
|       | 1,584,000 |             |  |  | 5/99  |          |  | Centrex, Inc.,publicly traded over the
    counter  15.7%; developer of water and purification
    methodologies                                    |  |   | 522,720    |  |  |   | 1,552,320 |  
|       | 900,000   |             |  |  | 5/99  |          |  | Nubar, Inc.,privately held  0%;
    developer of construction materials                                                                             |  |   | 126,000    |  |  |   |          |  
|       | 1,037,957 |             |  |  | 6/99  |          |  | NuElectric Corporation,publicly traded over the
    counter  3.8%; environmental services                                                           |  |   | 590,388    |  |  |   | 373,665   |  
|       | 150       |             |  |  | 11/99 |          |  | Rosbon, Inc.,privately held  0.8%; real
    estate development                                                                                      |  |   | 90,705     |  |  |   | 76,768    |  
|       | 100,799   |             |  |  | 3/00  |          |  | Graphco Technologies, Inc.,privately held  5.1%;
    developer of e-commerce technologies                                                           |  |   | 952,362    |  |  |   | 511,050   |  
|       | 2,326,153 |             |  |  | 6/00  |          |  | Advanced Recycling Sciences, Inc.,(formerly The Quantum Group, Inc.),
    publicly traded over the counter  10.6%; tire
    recycling methodologies |  |   | 2,158,952  |  |  |   | 1,046,769 |  
|       | 1,068,354 |             |  |  | 11/00 |          |  | Torvec, Inc.,publicly traded over the
    counter  8.7%; advanced automotive technologies                                                           |  |   | 2,147,392  |  |  |   | 865,367   |  
|       | 641,667   |             |  |  | 4/01  |          |  | BitzMart, Inc.,privately held  18.8%;
    software products                                                                                         |  |   | 1,658,000  |  |  |   | 1,867,251 |  
|       | 1,850,000 |             |  |  | 5/01  |          |  | Sense Holdings, Inc.,publicly traded over the
    counter  10.3%; biometric technologies                                                            |  |   | 481,000    |  |  |   | 1,017,500 |  
|       | 810,000   |             |  |  | 9/01  |          |  | Prime Pharmaceutical Corporation,privately held  4.1%;
    pharmaceutical developments in dermatology                                               |  |   | 486,000    |  |  |   | 405,000   |  
|       | 1,000,000 |             |  |  | 11/01 |          |  | Primapharm Funding Corporation,privately held  4.9%;
    intellectual property development                                                          |  |   | 490,000    |  |  |   | 490,000   |  
|       | 400,000   |             |  |  | 11/01 |          |  | Palladium Communications, Inc.,(formerly USAOnestar.Net Inc),publicly traded over the counter  .6%; telecom
    educational internet service        |  |   | 56,000     |  |  |   | 56,000    |  
|       |           |             |  |  |       |          |  |                                                                                                                                                      |  |   |            |  |  |   |           |  
|       |           |             |  |  |       |          |  | TOTAL INVESTMENTS  100.8%                                                                                                                           |  | $ | 10,018,958 |  |  | $ | 9,988,772 |  
|       |           |             |  |  |       |          |  |                                                                                                                                                      |  |   |            |  |  |   |           |  
|       |           |             |  |  |       |          |  | Cash and other assets, less
    liabilities  (.8)%                                                                                                  |  |   |            |  |  |   | (79,332   | )
|       |           |             |  |  |       |          |  |                                                                                                                                                      |  |   |            |  |  |   |           |  
|       |           |             |  |  |       |          |  | Net assets at December 31, 2001 
    100%                                                                                                           |  |   |            |  |  | $ | 9,909,440 |  
|       |           |             |  |  |       |          |  |                                                                                                                                                      |  |   |            |  |  |   |           |  

Notes to Schedule of Investments:



| |   |                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The above investments 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 ascertainable market value is determined in good faith
    by the Board of Directors. In making its determination, the
    Board of Directors may consider valuation appraisals provided by
    independent financial experts. (See Notes 1 and 2 to the
    consolidated financial statements).

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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As of December 31, 2001, all of the
    securities that we have own are restricted
    securities, as that term is defined under Rule 144.
    These securities may not be sold in the absence of registration
    under the 1933 Act or an exemption therefrom. As a result, our
    ability to sell or otherwise transfer the securities we hold in
    our portfolio is limited.
|
| |  | The Company owns more than 10% of the outstanding
    common stock of each of the above investments with the exception
    of Graphco Technologies, Inc., Torvec, Inc., Lexon, Inc., and
    Prime Pharmaceutical Corporation. As such, the Company is deemed
    to be an affiliate of the above companies, as defined under
    Rule 144, except for those specifically noted.     

See accompanying notes

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UTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1. Nature of Business and Significant
Accounting Policies

The
Company

We are 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).

We commenced operations in 1997 as UTEK
Corporation (UTEK Florida), which was incorporated
under the laws of the State of Florida in August 1996. UTEK
Florida was engaged in the business of technology transfer. On
December 31, 1998, we formed UTEK, LLC, a limited liability
company organized under the laws of the State of Florida.
Subsequent thereto, the shareholders of UTEK Florida exchanged
their shares of common stock for membership units in UTEK, LLC.
In July 1999, we formed UTEK Corporation under the laws of the
State of Delaware and in October 1999, UTEK LLC was merged into
UTEK Corporation.

In September 2001, UTEK Corporation acquired 100%
of the outstanding common stock of PAX Technology Transfer Ltd.,
a United Kingdom corporation, in a stock for stock transaction.
In May 2002, UTEK Corporation acquired 100% of the outstanding
common stock of Techex Acquisition Corporation
(TechEx) in a stock for stock transaction. TechEx
owned the TechEx.com website. The TechEx.com website is used by
many technology transfer and research professionals to
efficiently exchange licensing opportunities and innovations
available for partnering. The financial position and results of
operation of PAX Technology Transfer Ltd. and Techex Acquisition
Corporation have been consolidated into the financial position
and results of operation of the Company, since the dates of
their respective acquisition.

As a BDC, we must be primarily engaged in the
business of furnishing capital and making available managerial
assistance to companies that generally do not have ready access
to capital through conventional financial channels. Such
companies are termed portfolio companies.

The Company invests in portfolio companies that
management believes are positioned to benefit from the
acquisition of new technology. The Companys investments in
portfolio companies generally are used by the portfolio
companies to acquire the license rights to new technologies
developed at universities and/or government research facilities.
The Company offers to provide portfolio companies with
managerial assistance primarily related to technology transfer.
Technology transfer is the process by which technologies
developed by universities or research laboratories are licensed
to companies for commercial use. The Company also may make
additional investments to fund continued research and
development of the acquired technologies, but has not done so to
date.

We have executed or will execute our investments
in portfolio companies through the creation and capitalization
of a subsidiary to acquire a new technology, which subsidiary
will then be merged with a portfolio company in a non-taxable
exchange of shares of the portfolio company. In connection with
such transaction, we receive shares of common stock in the
portfolio company in exchange for the securities of our
subsidiary company. In addition to holding a license to a new
technology, our subsidiary company may also hold cash and other
assets. The portfolio companies frequently have little or no
prior operating history.

To establish on-going consulting engagements with
its clients, the Company has also developed a strategic alliance
arrangement. UTEKs strategic alliances are designed to
help technology companies rapidly enhance their new product
pipeline through the acquisition of proprietary intellectual
capital from universities and federal laboratories.

Principles of
Consolidation

The consolidated financial statements include the
accounts of UTEK Corporation and its wholly owned subsidiaries.
All intercompany transactions and balances are eliminated in
consolidation. Wholly-owned

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UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



1. Nature of Business and Significant
Accounting Policies  (Continued)


subsidiaries used to acquire new technologies are
consolidated with the Company prior to exchange of their shares
with a portfolio company.

Impairment of
Long-lived Assets

We account for long-lived asset impairments under
Statement of Financial Accounting Standards No. 144 (SFAS
144), Accounting for the Impairment or Disposal of Long
Lived Assets. Consistent with prior guidance, SFAS 144
requires a three-step approach for recognizing and measuring the
impairment of assets to be held and used. The Company recognizes
impairment losses on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than
the assets carrying amounts. The impairment loss is
measured by comparing the fair value of the asset to its
carrying amount. Fair value is estimated based on discounted
future cash flows. Assets to be sold must be stated at the lower
of the assets carrying amount or fair value and depreciation is
no longer recognized. SFAS 144 was adopted on January 1,
2002. Prior to SFAS 144s adoption, we accounted for
impairments under Statement of Financial Accounting Standards
No. 121 (SFAS 121), Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of.

Intangible
Assets

Intangible assets consist primarily of the excess
cost over the fair value of net identifiable assets acquired
(goodwill) relating to the September 28, 2001
acquisition of Pax Technology Transfer, Ltd. and software
relating to the May 2002 acquisition of TechEx. Accumulated
amortization was $8,272 and $0 at December 31, 2002 and
2001 respectively. The software is being amortized over five
years. The Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assetsand as a result, the related goodwill is not being amortized.

Segment
Disclosures

Management considers the Company as operating in
only one segment, the transfer of new technologies. A
wholly-owned subsidiary of UTEK Corporation has assets in the
United Kingdom, however, the assets and operations are not
significant.

Use of
Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates

Investments

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. In making its
determination, the Board of Directors has considered valuation
appraisals provided by an independent financial expert. With
respect to equity securities in privatelyowned 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 sale are
generally valued at a discount from the market value of the
securities as quoted

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UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



1. Nature of Business and Significant
Accounting Policies  (Continued)


on the stock exchanges. In addition restricted
and unrestricted publicly traded stocks may also be valued at
further discounts due to the size of our investment or market
liquidity concerns.

The 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 ascertainable market value, the
value of our portfolio of equity securities may differ
significantly from the values that would be placed on the
portfolio if there existed a ready market for such equity
securities. Equity securities owned at December 31, 2002
and December 31, 2001 (84.5% and 100.8% of net assets,
respectively) are stated at fair value as determined by the
Board of Directors, in the absence of readily ascertainable fair
values. The Company uses the first-in, first-out
(FIFO) method of accounting for sales of its investments.

Cash and Cash
Equivalents

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

Short-term
Investments

In 2001, the Company had a cash management
program that provides for the investment of excess cash balances
primarily in short-term commercial paper, treasury bills and
mutual funds. The Company classifies all of its short-term
investments as available-for-sale securities. Such short-term
investments at December 31, 2001, consisted of a mutual
fund, which is stated at market value, with unrealized gains and
losses on such securities reflected, net of tax, in net assets.
Realized gains and losses on short-term investments are included
in earnings and are derived using the specific identification
method for determining the cost of securities.

Income
Taxes

The Company does not qualify as a Regulated
Investment Company for income tax purposes. Therefore, the
Company is taxed as a regular C corporation for
federal and state income tax purposes.

Revenue
Recognition



| |                          
| | -------------------------
| | Sale Of Technology Rights

The Company recognizes revenue from the sale of
technology rights upon the exchange of the shares of our
subsidiary companies with unrelated portfolio companies. The
Company records revenue, based on the fair value as determined
by the Board of Directors, of the consideration received. In
most cases, the consideration received for the rights is
unregistered shares of common stock of the purchaser. The common
stock received is recorded as an investment at fair value as
determined by the Board of Directors.



| |                              
| | -----------------------------
| | Consulting and Other Services

Revenue derived from consulting services is
generally paid in unregistered shares of common stock of the
client. When shares of unregistered shares of common stock are
received from the client, revenue is recognized as earned,
ratably over the term of the underlying consulting agreements.
The unregistered shares of common stock received are recorded as
an investment at fair value as determined by the Board of
Directors.

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UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



1. Nature of Business and Significant
Accounting Policies  (Continued)


In some cases, the Company is paid a fee for
negotiating a successful technology transfer. In these
instances, revenue is recognized upon consummation of the
transaction.

In addition to technology transfer merger
transactions we offer the strategic alliance agreement. A method
of technology transfer already being used by PAX Technology
Transfer Ltd., the strategic alliance agreement is a service
agreement (usually one year in length) in which UTEK provides
consulting services by identifying and evaluating technology
acquisition opportunities in exchange for unregistered shares of
the company, or cash. These agreements are cancelable at any
time.

Revenues from strategic 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 strategic 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 an investment at fair value as determined by the
Board of Directors.

The Companys consolidated subsidiary, PAX
Technology Transfer, Ltd., derives its revenue primarily from
consulting contracts with third parties. Revenue from consulting
contracts is recognized ratably over the term of the contract,
typically ninety days. These contracts are generally paid in the
form of cash.

Revenue from the sale of subscriptions to the
TechEx.com website generally is received in the form of cash and
initially is deferred and subsequently recognized ratably over
the term of the subscription.

Fixed
Assets

Fixed assets are stated at cost, less accumulated
depreciation. Depreciation is recorded using the straight-line
method over the estimated useful lives of the respective assets
(generally two to five years). Leasehold improvements are
amortized over the shorter of the estimated useful life of the
assets or lease term.

Stock Based
Compensation

The Company follows Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees(APB 25) and related interpretations in accounting for its
qualified and nonqualified stock options whereby compensation
expense is recognized if the fair value of the stock option
exceeds the exercise price at date of grant. The Company has
adopted the disclosure-only option under Statements of Financial
Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation(SFAS 123).

As required under FAS 123, the following table
illustrates the pro forma effects as if the Company had used the
fair value method of accounting for its stock options, for each
of the years ended December 31:

|                                                                              |  |      |            |      |  |      |          |   |  |   |           |  
|----------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | -------- | - |  | - | --------- | -
|                                                                              |  | 2002 |            | 2001 |  | 2000
|                                                                              |  |      |            |      |  |     
|Net increase (decrease) in net assets from
    operations                     |  | $    | (2,692,780 | )    |  | $    | 644,283  |   |  | $ | 1,122,700 |  
|Pro forma effect                                                              |  |      | (247,457   | )    |  |      | (197,692 | ) |  |   | (80,877   | )
|                                                                              |  |      |            |      |  |      |          |   |  |   |           |  
|Pro forma net increase (decrease) in net
    assets from operations           |  | $    | (2,940,237 | )    |  | $    | 446,591  |   |  | $ | 1,041,823 |  
|                                                                              |  |      |            |      |  |      |          |   |  |   |           |  
|Net increase (decrease) in net assets from
    operations per share           |  | $    | (.69       | )    |  | $    | .17      |   |  | $ | .38       |  
|Pro forma per share effect                                                    |  |      | (.06       | )    |  |      | (.05     | ) |  |   | (.03      | )
|                                                                              |  |      |            |      |  |      |          |   |  |   |           |  
|Pro forma net increase (decrease) in net
    assets from operations per share |  | $    | (.75       | )    |  | $    | .12      |   |  | $ | .35       |  
|                                                                              |  |      |            |      |  |      |          |   |  |   |           |  

55



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UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



1. Nature of Business and Significant
Accounting Policies  (Continued)


Concentrations
of Credit Risk

Cash and cash equivalents are financial
instruments that potentially subject the Company to
concentrations of credit risk. The fair value of financial
instruments approximates the carrying value based on available
market information. The Company invests its excess available
funds primarily in U.S. Government backed securities. The
Companys customers are typically located in the United
States.

Research and
Development

Research and development costs consist of
expenditures incurred during the course of planned search and
investigation aimed at discovery of new knowledge that will be
useful in developing new products or processes. The Company
expenses all research and development costs as they are
incurred. During the twelve months ended December 31, 2002,
2001 and 2000 the Company incurred $-0-, $356,000 and $375,000,
respectively, in such costs.

Foreign currency
translation

The Company translates the assets and liabilities
of its non-U.S. functional currency subsidiary into dollars at
the current rates of exchange in effect at the end of each
reporting period. Revenues and expenses are translated using
rates that approximate those in effect during the period.
Translation adjustments are included in the Consolidated Balance
Sheets under the caption Foreign currency translation
adjustment.

Impact of Future
Accounting Standards

The provisions of SFAS 142 require that a
transitional impairment test for goodwill be performed as of the
adoption date. The Company has performed this test and has
determined that there is no impact in applying SFAS 142 in its
financial statements. On an ongoing basis, absent any impairment
indicators, the Company expects to perform its annual evaluation
during the fourth quarter.

2. Investments

Equity securities at December 31, 2002 and
December 31, 2001 (84.5 % and 100.8% of net assets,
respectively) were valued at fair value as determined by the
Board of Directors, with the assistance of appraisals provided
by an independent financial expert, in the absence of readily
ascertainable market values.

The values assigned to these securities are based
upon available information and may not reflect amounts that
could be realized if the Company found it necessary to
immediately sell such securities, or amounts that ultimately may
be realized. Accordingly, the fair values included in the
accompanying schedule of investments may differ from the values
that would have been used had a ready market existed for these
securities and such differences could be significant.

As of December 31, 2002 and
December 31, 2001, the Company had established three and
four subsidiary companies, respectively, which had $-0- net
assets.

On February 19, 2001, the Company sold its
Technology Development, Inc. subsidiary company to Advanced
Recycling Sciences, Inc., (formerly known as The Quantum Group,
Inc.)for 1,446,153 unregistered shares of Advanced Recycling
Sciences, Inc. common stock in a non-taxable exchange.

On April 20, 2001, the Company sold its
Watermark Technologies, Inc. subsidiary company to Stealth
MediaLabs, Inc. (formerly BitzMart, Inc.) for 450,000
unregistered shares of Stealth MediaLabs, Inc. common stock in a
non-taxable exchange.

56



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##### Table of Contents



UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



2. Investments 
(Continued)


On May 31, 2001, the Company sold its Micro
Sensor Technologies, Inc. subsidiary company to Sense Holdings,
Inc. for 1,850,000 unregistered shares of Sense Holdings, Inc.
common stock in a non-taxable exchange.

On August 14, 2001, the Company acquired
41,667 unregistered shares of common stock from BitzMart, Inc.
at $3.00 per share for $125,000.

On September 27, 2001, the Company acquired
250,000 unregistered shares of common stock from Prime
Pharmaceutical Corporation at $.60 per share for $150,000.

On September 28, 2001, the Company sold its
Advanced Microsphere Technology, Inc. subsidiary company to
Prime Pharmaceutical Corporation for 560,000 shares of Prime
Pharmaceutical Corporation common stock in a non-taxable
exchange.

On September 14, 2001, the Company received
100,000 unregistered shares of common stock from BitzMart, Inc.
at $2.31 per share in connection with a strategic alliance
agreement.

On October 29, 2001, the Company received
1,000,000 unregistered shares of common stock from Primapharm
Funding Corporation in connection with a strategic alliance
agreement. The Company has recognized consulting fees to date
relating to 1,000,000 shares.

On November 1, 2001, the Company received
50,000 unregistered shares of common stock from BitzMart, Inc.
at $2.91 per share in connection with a strategic alliance
agreement. The Company has recognized consulting fees to date
relating to the 50,000 shares.

On November 28, 2001, the Company received
400,000 unregistered shares of common stock from Palladium
Communications, Inc. (formerly known as USAOnestar.net, Inc.) in
a strategic alliance agreement. The Company has recognized
consulting fees to date relating to 400,000 shares.

On January 11, 2002, the Company entered
into a strategic alliance agreement with Circle Group Holdings,
Inc. (formerly Circle Group Internet, Inc.). The agreement
provides for a total of 48,000 unregistered shares of Circle
Group Holdings, Inc.s common stock to be distributed to
the Company pro rata during the term of the agreement. As of
December 31, 2002, the Company has received and recognized
to date consulting fees in relation to 44,000 unregistered
shares of Circle Group Holdings, Inc.

On January 21, 2002, the Company received
114,276 unregistered shares of Group Management
Corporations common stock in connection with a strategic
alliance agreement. As of December 31, 2002, the Company
has recognized consulting fees to date related to 47,615 shares.
The strategic alliance was cancelled in June 2002 and 66,661
shares were returned to Group Management Corporation.

On February 11, 2002, the Company entered
into a strategic alliance agreement with Voice and Wireless
Corporation. The agreement provides for a total of 540,000
unregistered shares of Voice and Wireless Corporations
common stock to be distributed to the Company pro rata during
the term of the agreement. As of December 31, 2002, the
Company has recognized consulting fees to date related to
315,000 shares. The strategic alliance was cancelled in August
2002.

On April 2, 2002, the Company received
48,000 unregistered shares of common stock from Hydrogen
Technology Applications, Inc. in a strategic alliance agreement.
As of December 31, 2002, the Company has recognized
consulting fees to date relating to 36,000 shares.

On May 7, 2002, the Company sold its Nitrone
Scientific, Inc. subsidiary company to Prime Pharmaceutical
Corporation for 683,550 shares of Prime Pharmaceutical
Corporations common stock in a non-taxable exchange.

On May 7, 2002, the Company sold its Digital
Image Enhancement Technologies, Inc. subsidiary company to Image
Analysis, Inc. for 465,000 unregistered shares of Image
Analysis, Inc.s common stock in a non-taxable exchange.

57



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##### Table of Contents



UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2. Investments 
(Continued)

On May 31, 2002, the Company received 30,000
unregistered shares of common stock from FullCircle Registry,
Inc. in a strategic alliance agreement. As of December 31,
2002, the Company has recognized consulting fees to date
relating to 17,500 shares.

On June 11, 2002, the Company sold its
Energy Management Technologies, Inc. subsidiary company to Voice
and Wireless Corporation for 318,750 unregistered shares of
Voice and Wireless Corporations common stock in a
non-taxable exchange.

On June 12, 2002, the Company sold its
Electronic Luminescent Technologies, Inc. subsidiary company to
FullCircle Registry, Inc. for 68,250 unregistered shares of
FullCircle Registry, Inc.s common stock in a non-taxable
exchange.

On August 27, 2002, the Company sold its
Fiber-Gel Technologies, Inc. subsidiary company to Circle Group
Holdings, Inc. (formerly Circle Group Internet, Inc.) for
2,800,000 unregistered shares of Circle Group Holdings,
Inc.s common stock and a warrant to purchase an additional
500,000 shares of its common stock at $0.36 per share in a
non-taxable exchange.

On September 27, 2002, the Company sold its
Spoken Data Technologies, Inc. subsidiary company to FullCircle
Registry, Inc. for 157,500 unregistered shares of FullCircle
Registry, Inc.s common stock in a non-taxable exchange.

On September 12, 2002, the Company received
120,000 unregistered shares of common stock from Innovative
Medical Services, Inc. in a strategic alliance agreement. As of
December 31, 2002, the Company has recognized consulting
fees to date relating to 35,922 shares.

On December 24, 2002, the Company received
231,000 unregistered shares of common stock from FullCircle
Registry, Inc. at $.86 in connection with a consulting
agreement. As of December 31, 2002, the Company has
recognized consulting fees to date relating to 231,000 shares.

3. Fixed Assets

Fixed assets consist of the following:

|                              |  |              |         |      |  |   |         |  
|----------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                              |  |             
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |         | 2001
|                              |  |              |         |     
|Computer Equipment            |  | $            | 87,815  |      |  | $ | 86,859  |  
|Furniture and Fixtures        |  |              | 44,974  |      |  |   | 43,051  |  
|Leasehold Improvements        |  |              | 20,455  |      |  |   | 19,150  |  
|                              |  |              |         |      |  |   |         |  
|                              |  |              | 153,244 |      |  |   | 149,060 |  
|Less accumulated depreciation |  |              | (87,989 | )    |  |   | (60,774 | )
|                              |  |              |         |      |  |   |         |  
|                              |  | $            | 65,255  |      |  | $ | 88,286  |  
|                              |  |              |         |      |  |   |         |  

4. Income Taxes

Prior to October 14, 1999, the
Companys business was structured as a limited liability
company (LLC). The LLC elected to be treated as a
partnership under the provisions of Subchapter K of the Internal
Revenue Code. Under those provisions, the LLC did not pay
corporate income taxes on its taxable income. Instead, the
owners of the LLC were individually liable for income taxes on
the LLCs taxable income. The LLCs subsidiaries,
including UTEK Holdings and UTEK Corporation, were all taxed as
C corporations.

On October 14, 1999, the Company
restructured its business, whereby the members of the LLC
contributed their membership interests to the Company, a newly
created corporation. As a result, all of the

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##### Table of Contents



UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4. Income Taxes 
(Continued)

LLCs assets, including the stock of its
subsidiaries, were transferred to the Company and the LLC was
dissolved. In addition, UTEK Holdings and UTEK Corporation were
liquidated into the Company. As of October 14, 1999, the
Company is taxable as a C corporation.

The Company accounts for income taxes under FASB
No. 109, Accounting for Income Taxes(SFAS No. 109). Deferred income tax assets and
liabilities are determined based upon differences between
financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

The components of the income tax provision on
operations, excluding income tax expense (benefit) on
realized gains (losses) and unrealized appreciation
(depreciation) of investments are as follows:

|          |         |                         |        |        |  |      |         |         |  |   |           |         | 
|--------- | ------- | ----------------------- | ------ | ------ |  | ---- | ------- | ------- |  | - | --------- | ------- | 
|          |         |                        
|          |         | Year Ended December 31,
|          |         |                        
|          |         | 2002                    |        | 2001   |  | 2000
|          |         |                         |        |        |  |     
|Current:  |         |                         |        |        |  |      |         |         |  |   |           |        
|          | Federal |                         | $      |       |  |      | $       |        |  |   | $         |        | 
|          | State   |                         |        |       |  |      |         |        |  |   |           |        | 
|          | Foreign |                         |        | 16,781 |  |      |         |        |  |   |           |        | 
|          |         |                         |        |        |  |      |         |         |  |   |           |        
|          |         | $                       | 16,781 |        |  | $    |        |         |  | $ |          |        
|          |         |                         |        |        |  |      |         |         |  |   |           |        
|Deferred: |         |                         |        |        |  |      |         |         |  |   |           |        
|          | Federal |                         | $      | 64,250 |  |      | $       | 473,320 |  |   | $         | 867,428 | 
|          | State   |                         |        | 10,510 |  |      |         | 81,978  |  |   |           | 150,906 | 
|          |         |                         |        |        |  |      |         |         |  |   |           |        
|          |         |                         | 74,760 |        |  |      | 555,298 |         |  |   | 1,018,334 |        
|          |         |                         |        |        |  |      |         |         |  |   |           |        
|          |         | $                       | 91,541 |        |  | $    | 555,298 |         |  | $ | 1,018,334 |        
|          |         |                         |        |        |  |      |         |         |  |   |           |        

A reconciliation of the differences between the
effective income tax rate and the statutory federal tax rate
follows:

|                                    |  |                         |        |      |  |      |         |  |  |   |           | 
|----------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------- |  |  | - | --------- | 
|                                    |  |                        
|                                    |  | Year Ended December 31,
|                                    |  |                        
|                                    |  | 2002                    |        | 2001 |  | 2000
|                                    |  |                         |        |      |  |     
|Tax at U.S. statutory rate          |  | $                       | 80,028 |      |  | $    | 497,255 |  |  | $ | 915,601   | 
|State taxes, net of federal benefit |  |                         | 8,820  |      |  |      | 54,104  |  |  |   | 98,217    | 
|Other                               |  |                         | 2,693  |      |  |      | 3,939   |  |  |   | 4,516     | 
|                                    |  |                         |        |      |  |      |         |  |  |   |           | 
|                                    |  | $                       | 91,541 |      |  | $    | 555,298 |  |  | $ | 1,018,334 | 
|                                    |  |                         |        |      |  |      |         |  |  |   |           | 

Significant components of the Companys
deferred tax assets and liabilities are as follows:

|                                         |                            |                         |            |          |   |   |            |            |  
|---------------------------------------- | -------------------------- | ----------------------- | ---------- | -------- | - | - | ---------- | ---------- | -
|                                         |                            |                        
|                                         |                            | Year Ended December 31,
|                                         |                            |                        
|                                         |                            | 2002                    |            | 2001    
|                                         |                            |                         |            |         
|Net operating loss carryforward          |                            | $                       | 1,050,332  |          |   | $ | 871,326    |           
|Capital loss carryforward                |                            |                         |           |          |   |   | 52,236     |           
|Tax credit carryforward                  |                            |                         | 16,781     |          |   |   |           |           
|Other                                    |                            |                         | (2,301     | )        |   |   | (876       | )         
|Investments in non-controlled affiliates |                            |                         | (1,310,401 | )        |   |   | (2,810,673 | )         
|                                         |                            |                         |            |          |   |   |            |           
|                                         | Net deferred tax liability |                         | $          | (245,589 | ) |   | $          | (1,887,987 | )
|                                         |                            |                         |            |          |   |   |            |           

SFAS No. 109 requires a valuation allowance
to reduce the deferred tax assets reported if, based on the
weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be

59



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UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4. Income Taxes 
(Continued)

realized. After consideration of all the
evidence, both positive and negative, management has determined
that a valuation allowance was not necessary as of
December 31, 2002 and 2001.

At December 31, 2002, the Company has
available U.S. net operating loss carryforwards of approximately
$2,773,000, which expire in years 2012, 2018, 2019, 2020, 2021
and 2022. At December 31, 2002 the Company has a capital
loss carryforward of approximately $-0-.

5. Stockholders Equity

Transactions in common stock for the three years
ended December 31, 2001 were as follows:

|                             |                                                               |        |           |           |  |                 |        |        |  |   |           |           | 
|---------------------------- | ------------------------------------------------------------- | ------ | --------- | --------- |  | --------------- | ------ | ------ |  | - | --------- | --------- | 
|Common Stock                 |                                                               | Shares |           | Par Value |  | Paid In Capital
|                             |                                                               |        |           |           |  |                
|Balance at December 31, 1999 |                                                               |        | 2,782,226 |           |  | $               | 27,822 |        |  | $ | 2,136,010 |          
|                             | Initial public offering 
    October 25, 2000                |        |           | 1,000,000 |  |                 |        | 10,000 |  |   |           | 4,037,849 | 
|                             |                                                               |        |           |           |  |                 |        |        |  |   |           |          
|Balance at December 31, 2000 |                                                               |        | 3,782,226 |           |  |                 | 37,822 |        |  |   | 6,173,859 |          
|                             | Private placement  June 2001                                 |        |           | 73,986    |  |                 |        | 740    |  |   |           | 374,877   | 
|                             | Acquisition PAX Technology Transfer,
    Ltd  September 2001 |        |           | 59,460    |  |                 |        | 595    |  |   |           | 439,405   | 
|                             |                                                               |        |           |           |  |                 |        |        |  |   |           |          
|Balance at December 31, 2001 |                                                               |        | 3,915,672 |           |  |                 | 39,157 |        |  |   | 6,988,141 |          
|                             | Acquisition of Techex Acquisition
    Corporation  May 2002  |        |           | 10,000    |  |                 |        | 100    |  |   |           | 70,800    | 
|                             |                                                               |        |           |           |  |                 |        |        |  |   |           |          
|Balance at December 31, 2002 |                                                               |        | 3,925,672 |           |  | $               | 39,257 |        |  | $ | 7,058,941 |          
|                             |                                                               |        |           |           |  |                 |        |        |  |   |           |          

Pursuant to the IPO agreement, the Company issued
100,000 warrants on October 25, 2000 at $.0003 to the
underwriter, to purchase an equal number of shares of the
Companys common stock. These warrants are exercisable over
the next three years at $9.90 per share. The warrants expire on
October 25, 2005.

6. Stock Compensation, Employment
Agreements and Stock Options

The Company accounts for stock grants to
employees in exchange for services in accordance with APB
No 25, Accounting for Stock Issued to
Employees.Stock grants to non-employees in exchange
for services are accounted for in accordance with FAS 123,
Accounting for Stock-Based Compensation.
There were no expenses related to stock grants to employees and
non-employees during fiscal 2002, 2001, and 2000.

Effective September 1, 1999, the Company
entered into five year employment agreements with its CEO and
President providing for an annual base salary of $150,000, and
$100,000, respectively, for their services. The President
resigned effective September 1, 2002. Effective
April 2, 2002, the Company entered into a one year
employment agreement with its CFO providing for an annual base
salary of $100,000 for his services.

In the year ended December 31, 1999, the
Company reserved 750,000 shares of common stock for issuance in
connection with the stock option plans. The Company adopted an
incentive stock option plan in September 1999 (the 1999
Plan) and a non-qualified stock option plan in February
2000 (the 2000 Plan). Under the terms of the 1999
Plan, the Company is authorized to issue options to purchase up
to 500,000 shares of the Companys common stock. The
options are intended to be incentive stock options within the
meaning of Section 422 of the Internal Revenue Code (the
Code), however, options may be issued under the 1999
Plan that do not qualify for incentive treatment under the Code.
Under the terms of the 2000 Plan, the Company is authorized to
issue options to purchase up to 250,000 shares of the
Companys common stock. Under the 2000 Plan, the Company
may only issue options that do not qualify for incentive
treatment under Section 422 of the Code. The per share
exercise price of each stock option granted under the 1999 Plan
and the 2000 Plan must be equal to the quoted fair market value
of the stock on the date of grant, except in the case of a more
than 10% shareholder for which grants are exercisable at 110% of
fair market value of the stock

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##### Table of Contents



UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

6. Stock Compensation, Employment
Agreements and Stock Options  (Continued)

on the date of grant. At December 31, 2002,
437,534 options from the 1999 Plan had been granted and 200,000
options from the 2000 Plan had been granted.

Pursuant to SFAS No. 123 Accounting
for Stock-Based Compensation,the Company has elected
to account for its stock option plan under APB Opinion 25,
Accounting for Stock Issued to Employees,and
adopt the disclosure-only provisions of SFAS No. 123. Under
APB 25, no compensation costs were recognized relating to
the option grants because the exercise price of the options
awarded was equal to the fair market price of the common stock
on the dates of grant. Under SFAS No. 123, the net increase
in net assets from operations would have decreased by $247,457,
or $.06 per share, for the year ended December 31, 2002,
$197,692, or $.05 per share, for the year ended
December 31, 2001, $80,877, or $.03 per share, for the year
ended December 31, 2000.

The fair value of each option granted in 2002,
2001 and 2000 was estimated using the Black-Scholes
option-pricing model with the following assumptions:

|                        |  |      |                |      |  |      |                |  |  |  |         | 
|----------------------- |  | ---- | -------------- | ---- |  | ---- | -------------- |  |  |  | ------- | 
|                        |  | 2002 |                | 2001 |  | 2000
|                        |  |      |                |      |  |     
|Expected dividend yield |  |      | 0.00%          |      |  |      | 0.00%          |  |  |  | 0.00%   | 
|Expected volatility     |  |      | 0.190          |      |  |      | 0.309          |  |  |  | 0.469   | 
|Risk-free interest      |  |      | 2.94% to 4.74% |      |  |      | 3.69% to 5.09% |  |  |  | 5.77%   | 
|Expected term           |  |      | 5 years        |      |  |      | 5 years        |  |  |  | 5 years | 

A summary of the Companys stock option
activity, and related information follows:

|                                                                   |  |         |          |                  |  |   |      | 
|------------------------------------------------------------------ |  | ------- | -------- | ---------------- |  | - | ---- | 
|                                                                   |  |         |          | Weighted-Average
|                                                                   |  |         |          | Exercise Price  
|                                                                   |  | Options |          | Per Share       
|                                                                   |  |         |          |                 
|Outstanding  December 31, 1999                                    |  |         |         |                  |  | $ |     | 
|Granted                                                            |  |         | 240,000  |                  |  |   | 6.30 | 
|                                                                   |  |         |          |                  |  |   |      | 
|Outstanding  December 31, 2000                                    |  |         | 240,000  |                  |  | $ | 6.30 | 
|Granted                                                            |  |         | 258,000  |                  |  |   | 7.02 | 
|Exercised                                                          |  |         |         |                  |  |   |     | 
|Canceled/expired                                                   |  |         |         |                  |  |   |     | 
|                                                                   |  |         |          |                  |  |   |      | 
|Outstanding  December 31, 2001                                    |  |         | 498,000  |                  |  | $ | 6.67 | 
|Granted                                                            |  |         | 294,534  |                  |  |   | 7.09 | 
|Exercised                                                          |  |         |         |                  |  |   |     | 
|Canceled/expired                                                   |  |         | (155,000 | )                |  |   | 6.81 | 
|                                                                   |  |         |          |                  |  |   |      | 
|Outstanding  December 31, 2002                                    |  |         | 637,534  |                  |  | $ | 6.79 | 
|                                                                   |  |         |          |                  |  |   |      | 
|Weighted-average fair value of options granted
    during the year |  |         |          |                  |  | $ | 1.91 | 
|                                                                   |  |         |          |                  |  |   |      | 

61



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##### Table of Contents



UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





6. Stock Compensation, Employment
Agreements and Stock Options  (Continued)


Approximately 331,284 options were exercisable at
December 31, 2002. The exercise price range of outstanding
options at December 31, 2002 follows:

|            |         |                 |  |            |      |             |  |  |      |  |  |  |         | 
|----------- | ------- | --------------- |  | ---------- | ---- | ----------- |  |  | ---- |  |  |  | ------- | 
|Outstanding |         | Exercise Price  |  |            |      | Exercisable
|Options     |         | Range Per Share |  | Expiration |      | Options    
|            |         |                 |  |            |      |            
|            | 135,000 |                 |  | $          | 6.00 |             |  |  | 2005 |  |  |  | 101,250 | 
|            | 55,000  |                 |  | $          | 6.13 |             |  |  | 2005 |  |  |  | 42,500  | 
|            | 20,000  |                 |  | $          | 5.75 |             |  |  | 2006 |  |  |  | 10,000  | 
|            | 2,000   |                 |  | $          | 7.50 |             |  |  | 2006 |  |  |  | 2,000   | 
|            | 5,000   |                 |  | $          | 7.00 |             |  |  | 2006 |  |  |  | 5,000   | 
|            | 5,000   |                 |  | $          | 7.41 |             |  |  | 2006 |  |  |  | 5,000   | 
|            | 125,000 |                 |  | $          | 7.40 |             |  |  | 2006 |  |  |  | 65,000  | 
|            | 2,500   |                 |  | $          | 7.23 |             |  |  | 2006 |  |  |  | 2,500   | 
|            | 1,000   |                 |  | $          | 7.13 |             |  |  | 2006 |  |  |  | 1,000   | 
|            | 5,000   |                 |  | $          | 7.25 |             |  |  | 2006 |  |  |  | 2,500   | 
|            | 5,000   |                 |  | $          | 7.00 |             |  |  | 2007 |  |  |  | 1,250   | 
|            | 14,488  |                 |  | $          | 7.05 |             |  |  | 2007 |  |  |  | 10,738  | 
|            | 3,500   |                 |  | $          | 7.08 |             |  |  | 2007 |  |  |  | 3,500   | 
|            | 252,500 |                 |  | $          | 7.10 |             |  |  | 2007 |  |  |  | 76,250  | 
|            | 5,000   |                 |  | $          | 7.25 |             |  |  | 2007 |  |  |  | 1,250   | 
|            | 56      |                 |  | $          | 6.30 |             |  |  | 2007 |  |  |  | 56      | 
|            | 1,490   |                 |  | $          | 6.10 |             |  |  | 2007 |  |  |  | 1,490   | 
|            |         |                 |  |            |      |             |  |  |      |  |  |  |         | 
|            | 637,534 |                 |  |            |      |             |  |  |      |  |  |  | 331,284 | 
|            |         |                 |  |            |      |             |  |  |      |  |  |  |         | 

The weighted-average remaining contractual life
of the outstanding options is approximately 3.6 years, and the
initial term for options is generally five years.

7. Commitments and
Contingencies

From time to time, some of the Companys
portfolio companies may receive correspondence or other notices
of alleged breach of the 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 portfolio
companies to cure the alleged breach may have a material adverse
impact on the Companys results of operations and financial
position.

8. Acquisition of Techex Acquisition
Corporation

In May 2002, the Company acquired 100% of
the outstanding common stock of Techex Acquisition Corporation.
This acquisition was made with the issuance of 10,000 shares of
unregistered common stock valued at $7.09 per share. This
acquisition has been accounted for under the purchase method of
accounting applying the provisions of Statement of Financial
Accounting Standards No. 141, Business Combinations
and accordingly, the operating results have been included in the
Companys consolidated results of operations from the date
of acquisition. There was no goodwill associated with this
transaction and all value was assigned to the website software.

9. Related Party Transactions

Sam Reiber, the Companys General Counsel
and a director of the Company is also a partner with the law
firm Linsky & Reiber in Tampa, Florida. Linsky & Reiber
has received approximately $16,377 and $33,000 in
December 31, 2002 and 2001, respectively, in compensation
during the past fiscal year for services performed for the
Company and holds 6,100 shares of the Company stock.

62



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UTEK CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

10. Interim Financial Information
(Unaudited)

|                                                                    |         |          |          |         |   |              |            |             |   |   |          |      |   |   |          |      |  
|------------------------------------------------------------------- | ------- | -------- | -------- | ------- | - | ------------ | ---------- | ----------- | - | - | -------- | ---- | - | - | -------- | ---- | -
|Fiscal year 2002:                                                   |         | March 31 |          | June 30 |   | September 30 |            | December 31
|                                                                    |         |          |          |         |   |              |            |            
|Income from operations                                              |         | $        | 269,954  |         |   | $            | 1,957,260  |             |   | $ | 688,828  |      |   | $ | 469,293  |     
|Net income (loss) from operations                                   |         |          | (271,050 | )       |   |              | 517,650    |             |   |   | 26,675   |      |   |   | (119,932 | )   
|Net increase (decrease) in net assets from
    operations           |         |          | (512,852 | )       |   |              | (1,045,998 | )           |   |   | (748,315 | )    |   |   | (385,615 | )   
|Net increase (decrease) in net assets from
    operations per share |         |          |          |         |   |              |            |             |   |   |          |      |   |   |          |     
|                                                                    | Basic   |          | $        | (.13    | ) |              | $          | (.27        | ) |   | $        | (.19 | ) |   | $        | (.10 | )
|                                                                    | Diluted |          | $        | (.13    | ) |              | $          | (.27        | ) |   | $        | (.19 | ) |   | $        | (.10 | )

|                                                                    |         |          |           |         |  |              |           |             |  |   |            |      |   |   |          |     | 
|------------------------------------------------------------------- | ------- | -------- | --------- | ------- |  | ------------ | --------- | ----------- |  | - | ---------- | ---- | - | - | -------- | --- | 
|Fiscal year 2001:                                                   |         | March 31 |           | June 30 |  | September 30 |           | December 31
|                                                                    |         |          |           |         |  |              |           |            
|Income from operations                                              |         | $        | 1,492,535 |         |  | $            | 1,657,259 |             |  | $ | 599,986    |      |   | $ | 312,103  |    
|Net income (loss) from operations                                   |         |          | 539,174   |         |  |              | 506,138   |             |  |   | 111,834    |      |   |   | (249,166 | )  
|Net increase (decrease) in net assets from
    operations           |         |          | 753,353   |         |  |              | 610,834   |             |  |   | (1,458,815 | )    |   |   | 738,911  |    
|Net increase (decrease) in net assets from
    operations per share |         |          |           |         |  |              |           |             |  |   |            |      |   |   |          |    
|                                                                    | Basic   |          | $         | .20     |  |              | $         | .16         |  |   | $          | (.38 | ) |   | $        | .19 | 
|                                                                    | Diluted |          | $         | .20     |  |              | $         | .16         |  |   | $          | (.38 | ) |   | $        | .19 | 

11. Subsequent Events

In February of 2002, Advanced Recycling Sciences,
Inc., notified the Company that Advanced Recycling Sciences,
Inc. had issued instructions to its transfer agent that
effectively prevents the Company from selling at least the
majority if not all of the shares that it owns of Advanced
Recycling Sciences, Inc. This action was taken as a result of a
dispute that exists between Advanced Recycling Sciences, Inc.
and licensor of certain technology to Advanced Recycling
Sciences, Inc. The Company is not a party to this license
dispute; however, Advanced Recycling Sciences, Inc. did acquire
the disputed license in a transaction with the Company.

The Company intends to pursue all remedies
available to it in order to resume the sale of its investment in
Advanced Recycling Sciences, Inc. There can be no assurance that
the Company will be successful in its efforts to resume the sale
of its investment in Advanced Recycling Sciences, Inc. A failure
to resume the sale of the Companys investment in Advanced
Recycling Sciences, Inc. would have a material negative impact
on the Companys financial condition and results of
operations.

12. Other Matters Affecting
Operations

The Company has incurred net losses in 2002 and
negative cash flows from operations for the past several years.
Recently, management has made reductions in its staffing and
operating costs to further streamline its costs. Management
believes that the cash on hand, combined with the proceeds from
sales of investments which are or will become freely tradable in
2003 due to the expiration of various restrictions, combined
with a commitment for approximately $247,000 in debt and equity
will be sufficient to allow the Company to continue as a going
concern for at least a year.

The commitment, which was obtained on
March 20, 2003 provides for a third party to sell
20,000 shares of restricted UTEK common stock for $3 per
share and to loan UTEK $200,000 for a two-year period. The loan
will be secured by 72,000 unregistered shares of UTEK common
stock. The third party, who will earn a fee for this placement,
has also committed that they will purchase the shares and
advance the funds to UTEK under the same terms if they are
unable to find a buyer and/or lender. The closing is expected to
be on or before April 30, 2003.

63



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SELECTED PER SHARE DATA AND RATIOS

|                                                                          |                                                                                                  |                        |           |      |   |      |           |      |   |      |           |      |   |   |           |      |   |   |           |     | 
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------- | --------- | ---- | - | ---- | --------- | ---- | - | ---- | --------- | ---- | - | - | --------- | ---- | - | - | --------- | --- | 
|                                                                          |                                                                                                  |                       
|                                                                          |                                                                                                  | Year Ended December 31
|                                                                          |                                                                                                  |                       
|                                                                          |                                                                                                  | 2002                   |           | 2001 |   | 2000 |           | 1999 |   | 1998
|                                                                          |                                                                                                  |                        |           |      |   |      |           |      |   |     
|Per share information                                                     |                                                                                                  |                        |           |      |   |      |           |      |   |      |           |      |   |   |           |      |   |   |           |    
|Net asset value, beginning of year                                        |                                                                                                  | $                      | 2.53      |      |   | $    | 2.24      |      |   | $    | 1.18      |      |   | $ | 0.56      |      |   | $ | .02       |    
|                                                                          | Net increase from operations(1)                                                                  |                        |           | .04  |   |      |           | .23  |   |      |           | 0.56 |   |   |           | 0.10 |   |   |           | .05 | 
|                                                                          | Net change in realized and unrealized
    appreciation/depreciation on investments (after taxes) |                        |           | (.73 | ) |      |           | (.14 | ) |      |           | (.87 | ) |   |           | (.04 | ) |   |           | .23 | 
|                                                                          | Foreign currency translation adjustment                                                          |                        |           | .01  |   |      |           | (.01 | ) |      |           |     |   |   |           |     |   |   |           |    | 
|                                                                          | Net increase from stock transactions                                                             |                        |           | .02  |   |      |           | .21  |   |      |           | 1.37 |   |   |           | 0.56 |   |   |           | .26 | 
|                                                                          |                                                                                                  |                        |           |      |   |      |           |      |   |      |           |      |   |   |           |      |   |   |           |    
|Net asset value, end of year                                              |                                                                                                  | $                      | 1.87      |      |   | $    | 2.53      |      |   | $    | 2.24      |      |   | $ | 1.18      |      |   | $ | .56       |    
|                                                                          |                                                                                                  |                        |           |      |   |      |           |      |   |      |           |      |   |   |           |      |   |   |           |    
|Per share market value, end of year(2)                                    |                                                                                                  | $                      | 6.25      |      |   | $    | 7.10      |      |   | $    | 5.75      |      |   |   | N/A       |      |   |   | N/A       |    
|Ratios/supplemental data net assets, end of year                          |                                                                                                  | $                      | 7,346,057 |      |   | $    | 9,909,440 |      |   | $    | 8,455,002 |      |   | $ | 3,284,453 |      |   | $ | 1,365,647 |    
|Ratio of expenses to average net assets(3)                                |                                                                                                  |                        | 36        | %    |   |      | 28        | %    |   |      | 32        | %    |   |   | 31        | %    |   |   | 31        | %  
|Ratio of net income to average net assets                                 |                                                                                                  |                        | 2         | %    |   |      | 10        | %    |   |      | 29        | %    |   |   | 12        | %    |   |   | 15        | %  
|Diluted weighted average number of shares
    outstanding during the year |                                                                                                  |                        | 3,921,535 |      |   |      | 3,882,914 |      |   |      | 2,968,720 |      |   |   | 2,682,420 |      |   |   | 2,304,691 |    



---



|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(1) | Calculated based on diluted weighted average
    number of shares outstanding during the year.
|(2) | Not applicable  Prior to public
    offering of shares.                                      
|(3) | Excluding income taxes.                                                                       






|         |                                                                                              
|-------- | ---------------------------------------------------------------------------------------------
|Item  9. | Changes in and Disagreements with
    Accountants on Accounting and Financial
    Disclosures

None.




PART III






|          |                                                       
|--------- | ------------------------------------------------------
|Item  10. | Directors and Executive Officers of the
    Registrant

The information set forth under the caption
ELECTION OF DIRECTORS, and SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE in the
Companys Proxy Statement for the 2003 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 within 120 days from the
fiscal year end, is incorporated herein by reference.






|          |                       
|--------- | ----------------------
|Item  11. | Executive Compensation

The information set forth under the caption
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS, in
the Companys Proxy Statement for the 2003 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934 within 120 days
from the fiscal year end, is incorporated herein by reference.






|          |                                                                   
|--------- | ------------------------------------------------------------------
|Item  12. | Security Ownership of Certain Beneficial
    Owners and Management

The information set forth under the caption
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS, in the Companys definitive Proxy Statement
for the 2003 Annual Meeting of Stockholders to be filed pursuant
to Regulation 14A under the Securities Exchange Act of 1934
within 120 days from the fiscal year end, is incorporated
herein by reference.

64



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##### Table of Contents






Item 13.     Certain
Relationships and Related Transactions

The information set forth under the caption
CERTAIN TRANSACTIONS in the Companys Proxy
Statement for the 2003 Annual Meeting of Stockholders to be
filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 within 120 days from the fiscal year
end, is incorporated herein by reference.




Item 14.     Controls
and Procedures

Disclosure
Controls and Procedures

The Companys Chief Executive Officer and
Chief Financial Officer have evaluated the Companys
disclosure controls and procedures (as defined in Rule 13a-14
and Rule 15d-14 of the Securities Exchange Act of 1934)
within the 90 days prior to the date of filing of this Annual
Report on Form 10-K. Based upon such review, the Chief
Executive Officer and Chief Financial Officer have concluded
that the Companys disclosure controls and procedures are
effective in timely alerting them to material information
relating to the Company that is required to be disclosed in the
reports it files or submits under the Securities Exchange Act of
1934.

Internal
Controls

Since the date of evaluation, there have not been
any significant changes in our internal accounting controls or
in other factors that could significantly affect those controls.




PART IV




Item 15.     Exhibits,
Financial Statement Schedules, and Reports on
Form 8-K

(a) The following documents are filed as
part of this report:



| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | 1. Financial Statements  The
    following financial statements of the Company are contained in
    Item 8 of this Form 10-K:



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | Consolidated Balance Sheets  At
    December 31, 2002 and 2001                                                       
|
| |  | Consolidated Statements of
    Operations  For the fiscal years ended
    December 31, 2002, 2001 and 2000           
|
| |  | Consolidated Statements of Cash
    Flows  For the fiscal years ended
    December 31, 2002, 2001 and 2000           
|
| |  | Consolidated Statements of Changes in Net
    Assets  For the fiscal years ended
    December 31, 2002, 2001 and 2000
|
| |  | Schedule of Investments  At
    December 31, 2002 and 2001                                                           
|
| |  | Notes to the Financial Statements                                                                                     
|
| |  | Selected Per Share Data and Ratios for the years
    ended December 31, 2002, 2001, 2000, 1999, and 1998              
|
| |  | Report of Independent Certified Public Accountants                                                                    



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Financial Statement Schedules were
    omitted as they are not required or are not applicable, or the
    required information is included in the Financial Statements.
|
| | 3. Exhibits                                                                                                                                                               

a.   The following exhibits are
filed with this report or are incorporated herein by reference
to a prior filing, in accordance with Rule 12b-32 under the
Securities Exchange Act of 1934.

65



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|           |  |   |  |                                                                                                                                                                                              
|---------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.(i)(1)   |  |  |  | Certificate of Incorporation, dated July 6,
    1999, as filed and recorded with the Secretary of State of the
    State of Delaware on July 13, 1999.                                       
|3.(ii)(2)  |  |  |  | Certificate of Amendment to Certificate of
    Incorporation, dated October 14, 1999, as filed and
    recorded with the Secretary of State of the State of Delaware on
    October 15, 1999.
|3.(iii)(3) |  |  |  | By-Laws of UTEK Corporation.                                                                                                                                                                 
|3.(iv)*    |  |  |  | Certificate of Amendment to Certificate of
    Incorporation dated October 14, 1999, as filed and recorded
    with the Secretary of State of the State of Delaware on
    July 24, 2001.    
|4.1(4)     |  |  |  | Form of Representatives Warrant.                                                                                                                                                            
|4.2(5)     |  |  |  | Certificate of Merger of UTEK Corporation and
    UTEK LLC, dated October 18, 1999, as filed and recorded
    with the Secretary of State of the State of Delaware on
    October 25, 1999.  
|4.3(6)     |  |  |  | Specimen Common Stock Certificate.                                                                                                                                                           
|10.1(7)    |  |  |  | Form of Financial Consulting Agreement between
    UTEK Corporation and Schneider Securities, Inc.                                                                                           
|10.2(8)    |  |  |  | 1999 Incentive Stock Option Plan, as corrected.                                                                                                                                              
|10.3(9)    |  |  |  | 2000 Non-Qualified Stock Option Plan, as
    corrected.                                                                                                                                      
|10.4(10)   |  |  |  | Employment Agreement with Clifford M. Gross.                                                                                                                                                 
|10.5(11)   |  |  |  | Employment Agreement with Uwe Reischl.                                                                                                                                                       
|10.6(12)   |  |  |  | Agreement dated January 30, 1998 between
    UTEK Corporation and the University of South Florida.                                                                                           
|10.7(13)   |  |  |  | Master Agreement dated June 18, 1999 between
    UTEK Corporation and Johns Hopkins University.                                                                                              
|10.8(14)   |  |  |  | Strategic Alliance dated November 3, 1999
    between UTEK Corporation and Fraunhofer Institute for
    Interfacial Engineering and Biotechnology IGB.                                       
|10.9(15)   |  |  |  | Strategic Alliance dated October 18, 1999
    between UTEK Corporation and University of Florida.                                                                                            
|10.10(16)  |  |  |  | Services Agreement dated May 18, 1998
    between UTEK Corporation and the University of Memphis.                                                                                            
|10.11(17)  |  |  |  | Consulting Agreement between UTEK Corporation and
    NuElectric Corporation, dated November 16, 1998.                                                                                       
|10.12(18)  |  |  |  | Consulting Agreement between UTEK Corporation and
    Darby Group Companies, dated May 3, 1999.                                                                                              
|10.13(19)  |  |  |  | License Agreement dated July 13, 1999
    between The Regents of the University of California and E. Coli
    Measurement Systems, Inc.                                                      
|10.14(20)  |  |  |  | License Agreement dated January 1, 1999
    between Clean Water Technologies, Inc. and the University of
    South Florida Research Foundation, Inc.                                         
|10.15(21)  |  |  |  | Sponsored Research Agreement dated
    February 12, 1999 between Advanced Reinforcing
    Technologies, Inc. and Cornell University.                                                         
|10.16(22)  |  |  |  | License Agreement between Cornell Research
    Foundation, Inc. and Advanced Reinforcing Technologies, Inc.
    dated March 1, 1999.                                                         
|10.17(23)  |  |  |  | License Agreement dated December 15, 1999
    between the California Institute of Technology and Digital
    Personnel, Inc.                                                                 
|10.18(24)  |  |  |  | License Agreement dated September 1999 between
    Safe Water Technologies, Inc. and University of South Florida
    Research Foundation, Inc.                                               
|10.19(25)  |  |  |  | Strategic Alliance dated December 13, 1999
    between UTEK Corporation and Virginia Tech Intellectual
    Properties, Inc.                                                                  
|10.20(26)  |  |  |  | Agreement and Plan of Merger dated March 21,
    2000 between UTEK Corporation, Digital Personnel, Inc. and
    Graphco-DPI Holding Company, Inc.                                            
|10.21(27)  |  |  |  | License Agreement dated as of March 28, 2000
    between Johns Hopkins University and Zorax, Inc.                                                                                            

66



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|          |  |   |  |                                                                                                                                     
|--------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------
|10.22(28) |  |  |  | Sponsored Research Agreement dated March 31,
    2000 between Johns Hopkins University and Zorax, Inc.                              
|10.23(29) |  |  |  | Strategic Alliance dated December 23, 1999
    between UTEK Corporation and Florida State University Research
    Foundation.       
|10.24(30) |  |  |  | Strategic Alliance dated March, 23, 2000 between
    UTEK Corporation and Florida Institute of Technology.                          
|10.25(31) |  |  |  | Strategic Alliance dated April 14, 2000
    between UTEK Corporation and Sopartec.                                                  
|10.26(32) |  |  |  | Strategic Alliance dated June 1, 2000
    between UTEK Corporation and Auburn University.                                           
|10.27(33) |  |  |  | Commercial Pledge and Security Agreement dated
    September 13, 2000 between UEK Corporation and The Bank of
    Tampa.            
|10.28(34) |  |  |  | Merger Agreement dated September 21, 2000
    between UTEK Corporation, NuElectric Corporation. and Zorax, Inc.                     
|10.29(35) |  |  |  | Merger Agreement dated November 29, 2000
    between UTEK Corporation, Torvec, Inc., and Ice Surface
    Development, Inc.          
|10.30(36) |  |  |  | Safekeeping Agreement dated December 12,
    2000 between UTEK Corporation and Bank of Tampa.                                       
|10.31(37) |  |  |  | Corporate Custody Agreement dated
    November 27, 2000 between UTEK Corporation and Bank of
    Tampa.                             
|10.32(38) |  |  |  | License Agreement dated as of February 9,
    2000 between Dartmouth College and Technology Development, Inc.                       
|10.33(39) |  |  |  | Strategic Alliance dated December 14, 2000
    between UTEK Corporation and Dartmouth College.                                      
|10.34(40) |  |  |  | Merger Agreement dated February 19, 2000,
    between UTEK Corporation, Technology Development, Inc. and The
    Quantum Group, Inc.
|10.35(41) |  |  |  | Marketing Agreement dated April 15, 1999
    between UTEK Corporation and Wolfram Weinsheimer.                                      
|10.36(42) |  |  |  | Amendment dated March 28, 2000 to the
    Marketing Agreement between UTEK Corporation and Wolfram
    Weinsheimer.                 
|10.37(43) |  |  |  | Marketing Agreement dated December 8, 1998
    between UTEK Corporation and Seth Frielich.                                          
|10.38(44) |  |  |  | Amendment dated March 28, 2000 to the
    Marketing Agreement between UTEK Corporation and Seth Frielich.                           
|10.39(45) |  |  |  | Marketing Agreement dated January 26, 1999
    between UTEK Corporation and Gerald Krueger.                                         
|10.40(46) |  |  |  | Amendment dated March 29, 2000 to the
    Marketing Agreement between UTEK Corporation and Gerald Krueger.                          
|10.41(47) |  |  |  | Marketing Agreement dated November 6, 2000
    between UTEK Corporation and GunnAllen Financial.                                    
|10.42(48) |  |  |  | Marketing Agreement dated January 10, 2001
    between UTEK Corporation and Schneider Securities, Inc.                              
|10.43(50) |  |  |  | Extension of Agreement dated January 10,
    1998 between UTEK Corporation and the University of South
    Florida.                 
|10.44(51) |  |  |  | Stock Purchase Agreement dated September 28,
    2001 between UTEK Corporation and PAX Technology Transfer, Ltd.                    
|10.45(52) |  |  |  | Strategic Alliance Agreement dated
    August 14, 2001 between UTEK Corporation and BitzMart, Inc.                                  
|24.1      |  |  |  | Powers of Attorney (included on signature page).                                                                                    
|99.1(53)  |  |  |  | Code of Ethics of UTEK Corporation.                                                                                                 

67



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##### Table of Contents



|      |  |   |  |                                                                                                                             
|----- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------
|99.2* |  |  |  | Certification of Chief Executive Officer Pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
    1350).
|99.3* |  |  |  | Certification of Chief Financial Officer Pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
    1350).






| |   |                
| | - | ---------------
| | * | Filed Herewith.

| |     |                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to Exhibit 3.1 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
| | (2) | Incorporated by reference to Exhibit 3.2 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
| | (3) | Incorporated by reference to Exhibit 3.3 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
| | (4) | Incorporated by reference to Exhibit 4.1 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
| | (5) | Incorporated by reference to Exhibit 4.2 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
| | (6) | Incorporated by reference to Exhibit 4.3 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
| | (7) | Incorporated by reference to Exhibit 10.1 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
| | (8) | Incorporated by reference to Exhibit 10.2 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
| | (9) | Incorporated by reference to Exhibit 10.3 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).

|     |                                                                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to Exhibit 10.4 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
|(11) | Incorporated by reference to Exhibit 10.5 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
|(12) | Incorporated by reference to Exhibit 10.6 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
|(13) | Incorporated by reference to Exhibit 10.7 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
|(14) | Incorporated by reference to Exhibit 10.8 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
|(15) | Incorporated by reference to Exhibit 10.9 to
    the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913). 
|(16) | Incorporated by reference to Exhibit 10.10
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(17) | Incorporated by reference to Exhibit 10.11
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(18) | Incorporated by reference to Exhibit 10.12
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(19) | Incorporated by reference to Exhibit 10.13
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(20) | Incorporated by reference to Exhibit 10.14
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(21) | Incorporated by reference to Exhibit 10.15
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(22) | Incorporated by reference to Exhibit 10.16
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(23) | Incorporated by reference to Exhibit 10.17
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).

68



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##### Table of Contents



|     |                                                                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(24) | Incorporated by reference to Exhibit 10.18
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(25) | Incorporated by reference to Exhibit 10.19
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(26) | Incorporated by reference to Exhibit 10.20
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(27) | Incorporated by reference to Exhibit 10.21
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(28) | Incorporated by reference to Exhibit 10.22
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(29) | Incorporated by reference to Exhibit 10.23
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(30) | Incorporated by reference to Exhibit 10.24
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(31) | Incorporated by reference to Exhibit 10.25
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(32) | Incorporated by reference to Exhibit 10.26
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(33) | Incorporated by reference to Exhibit 10.27
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(34) | Incorporated by reference to Exhibit 10.28
    to the Companys registration statement on Form N-2A
    filed with the Commission on October 2, 2000 (File
    No. 333-93913).
|(35) | Incorporated by reference to Exhibit 10.1 to
    the Companys report on Form 10-Q for the quarter
    ended September 30, 2000.                                              
|(36) | Incorporated by reference to Exhibit 10.30
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(37) | Incorporated by reference to Exhibit 10.31
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(38) | Incorporated by reference to Exhibit 10.32
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(39) | Incorporated by reference to Exhibit 10.33
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(40) | Incorporated by reference to Exhibit 2 to
    the Companys report on Form 8-K filed on
    March 6, 2001.                                                                    
|(41) | Incorporated by reference to Exhibit 10.35
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(42) | Incorporated by reference to Exhibit 10.36
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(43) | Incorporated by reference to Exhibit 10.37
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(44) | Incorporated by reference to Exhibit 10.38
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(45) | Incorporated by reference to Exhibit 10.39
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(46) | Incorporated by reference to Exhibit 10.40
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(47) | Incorporated by reference to Exhibit 10.41
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(48) | Incorporated by reference to Exhibit 10.42
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(49) | Incorporated by reference to Exhibit 10.43
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 
|(50) | Incorporated by reference to Exhibit 10.44
    to the Companys report on Form 10-K for the year
    ended December 31, 2000.                                                 

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|     |                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------
|(51) | Incorporated by reference to Exhibit 10.45
    to the Companys report on Form 10-K for the year
    ended September 30, 2001.
|(52) | Incorporated by reference to Exhibit 10.46
    to the Companys report on Form 10-K for the year
    ended September 30, 2001.
|(53) | Incorporated by reference to Exhibit 99 to
    the Companys report on Form 10-K for the year ended
    December 31, 2000.    






|   |                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | Reports on Form 8-K filed during the quarter
    ended December 31, 2002:                                                                                                                                                                                                                                                                                                                                                
|  
|   | Form 8-K/A dated May 31, 2002 (filed
    October 10, 2002) filing certain information required by
    Items 7(a) and 7(b) relating to the acquisition by UTEK
    Corporation of all the outstanding shares of common stock of
    Techex Acquisition Corporation, a Delaware corporation and
    wholly-owned subsidiary of Intellectual Property Technology
    Exchange, Inc., in a tax-free stock for stock exchange.
|  
|   | Form 8-K dated September 27, 2002
    (filed October 10, 2002) reporting under Item 5 the
    acquisition of Spoken Data Technologies, Inc., a 75% owned
    subsidiary of UTEK Corporation, by FullCircle Registry, Inc.                                                                                                                                                                                                



|   |                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|c. | Financial Statement Schedules were omitted, as
    they are not required or not applicable, or the required
    information is included in the consolidated financial statements
    and/or related notes.

70



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 28, 2003.



| |                 
| | ----------------
| | UTEK CORPORATION



| |     |                      
| | --- | ---------------------
| | By: | /s/ CLIFFORD M. GROSS

| |                        
| | -----------------------
| |                        
| | Clifford M. Gross      
| | Chief Executive Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant in the capacities
and on the dates indicated.

|                                                   |  |                                                                        |  |               
|-------------------------------------------------- |  | ---------------------------------------------------------------------- |  | --------------
|                                                   |  | Title                                                                  |  |               
|Signature                                          |  | (Capacity)                                                             |  | Date          
|                                                   |  |                                                                        |  |               
|                                                  
|/s/ CLIFFORD M. GROSSClifford M. Gross             |  | Chairman and Chief Executive Officer (Principal
    Executive Officer) |  | March 28, 2003
|                                                  
|/s/ CAROLE R. WRIGHTCarole R. Wright               |  | Controller (Principal Accounting Officer)                              |  | March 28, 2003
|                                                  
|/s/ MICHAEL O. SULLIVANMichael O. Sullivan         |  | Chief Financial Officer (Principal Financial
    Officer)              |  | March 28, 2003
|                                                  
|/s/ SAM REIBERSam Reiber                           |  | Director                                                               |  | March 28, 2003
|                                                  
|/s/ STUART M. BROOKSStuart M. Brooks               |  | Director                                                               |  | March 28, 2003
|                                                  
|/s/ KWABENA GYIMAH-BREMPONGKwabena Gyimah-Brempong |  | Director                                                               |  | March 28, 2003
|                                                  
|/s/ ARTHUR CHAPNIKArthur Chapnik                   |  | Director                                                               |  | March 28, 2003
|                                                  
|/s/ CARL NISSERCarl Nisser                         |  | Director                                                               |  | March 28, 2003
|                                                  
|/s/ JOHN MICEKJohn Micek                           |  | Director                                                               |  | March 28, 2003

71



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##### Table of Contents






CERTIFICATION OF CHIEF EXECUTIVE
OFFICER

I, Clifford M. Gross, Chief Executive Officer of
UTEK Corporation, certify that:

1. I have reviewed this annual report on
Form 10-K of UTEK Corporation;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or
persons performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                      
| | --- | ---------------------
| | By: | /s/ CLIFFORD M. GROSS

| |                                     
| | ------------------------------------
| |                                     
| | Clifford M. Gross                   
| | Chief Executive Officer and Chairman

Dated this 28th day of March, 2003

72



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##### Table of Contents






CERTIFICATION OF CHIEF FINANCIAL
OFFICER

I, Michael O. Sullivan, Chief Financial Officer
of UTEK Corporation, certify that:

1. I have reviewed this annual report on
Form 10-K of UTEK Corporation;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or
persons performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                        
| | --- | -----------------------
| | By: | /s/ MICHAEL O. SULLIVAN

| |                        
| | -----------------------
| |                        
| | Michael O. Sullivan    
| | Chief Financial Officer

Dated this 28th day of March, 2003

73



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##### Table of Contents






EXHIBIT INDEX

The following exhibits are filed with this report
in accordance with Rule 12b-32 under the Securities Exchange Act
of 1934.

|        |    |    |  |             |  |                                                                                                                             
|------- | -- | -- |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |  |            
|No.     |    |    |  | Description
|        |    |    |  |            
|        | 99 | .2 |  |            |  | Certification of Chief Executive Officer Pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
    1350).
|        | 99 | .3 |  |            |  | Certification of Chief Financial Officer Pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
    1350).

74