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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-K

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

For the fiscal year ended December 31, 2006

OR



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

COMMISSION FILE NUMBER: 001-15941



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UTEK CORPORATION



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|DELAWARE                                                      |  | 59-3603677                         
|(STATE OR OTHER JURISDICTION OFINCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYERIDENTIFICATION NO.)

2109 PALM AVENUE

TAMPA, FL 33605

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(813) 754-4330

(REGISTRANTS
TELEPHONE NUMBER)



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



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

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

NONE

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ̈No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes ̈No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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 ̈

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  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated filer  x    Non-accelerated
filer ̈

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ̈No  x

As of June 30, 2006, the aggregate market value of
the registrants common stock held by non-affiliates of the registrant was approximately $178,000,000 based upon the closing sale price for the registrants common stock on that date. As of February 28, 2007, there were 8,936,009
shares of the registrants common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive proxy statement for the 2007 Annual Meeting of Shareholders are incorporated by reference into Part III of
this report.



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TABLE OF CONTENTS

UTEK CORPORATION

Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2006



|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                              |  | Page
|PART I     |  |                                                                                                              |  |     
|           |  |                                                                                                             
|ITEM 1.    |  | BUSINESS                                                                                                     |  | 1   
|ITEM 1A.   |  | RISK FACTORS                                                                                                 |  | 8   
|ITEM 1B.   |  | UNRESOLVED STAFF COMMENTS                                                                                    |  | 15  
|ITEM 2.    |  | PROPERTIES                                                                                                   |  | 16  
|ITEM 3.    |  | LEGAL PROCEEDINGS                                                                                            |  | 16  
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 16  
|           |  |                                                                                                             
|PART II    |  |                                                                                                              |  |     
|           |  |                                                                                                             
|ITEM 5.    |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 17  
|ITEM 6.    |  | SELECTED FINANCIAL DATA                                                                                      |  | 19  
|ITEM 7.    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 19  
|ITEM 7A.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 35  
|ITEM 8.    |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 36  
|ITEM 9.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 78  
|ITEM 9A.   |  | CONTROLS AND PROCEDURES                                                                                      |  | 78  
|ITEM 9B.   |  | OTHER INFORMATION                                                                                            |  | 78  
|           |  |                                                                                                             
|PART III   |  |                                                                                                              |  |     
|           |  |                                                                                                             
|ITEM 10.   |  | DIRECTORS , EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                      |  | 79  
|ITEM 11.   |  | EXECUTIVE COMPENSATION                                                                                       |  | 79  
|ITEM 12.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  | 79  
|ITEM 13.   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                    |  | 79  
|ITEM 14.   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       |  | 79  
|           |  |                                                                                                             
|PART IV    |  |                                                                                                              |  |     
|           |  |                                                                                                             
|ITEM 15.   |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                   |  | 79  
|           | 
|SIGNATURES |  | 82                                                                                                          



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PART I

ITEM 1.Business

General

UTEK Corporation is a market-driven technology transfer business that assists companies in identifying and acquiring technologies. 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 potential commercial development and use. Our goal is to provide our client
companies an opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical centers and federal research laboratories.

As of December 31, 2006, we had investments of approximately $37.9 million at value, including securities in over 60 companies. We have transferred a diverse number of technologies to these and other companies
ranging from a reflective wireless technology for radio frequency identification to a method to facilitate the production of a zero calorie fat substitute. During the year ended December 31, 2006, we completed 29 technology transfers in which
we received equity securities of approximately $51.2 million at value and entered into 44 strategic alliance agreements in which we received equity securities of approximately $2.7 million at value. During 2005, we completed 14 technology transfers
for which we received equity securities of approximately $18.1 million at value and entered into 36 strategic alliance agreements for which we received equity securities of approximately $1.6 million at value.

We also provide our clients with a full range of complementary technology transfer related services and products, including the provision of technical
and business expertise to help companies analyze, assess, protect and leverage their patents and intellectual property assets to enhance their business.

We are 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 (the 1940
Act).

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.

Corporate History and Offices

We were formed in 1997 by our management to facilitate the transfer of new technologies developed by universities and other research institutions to commercial enterprises.

Our executive offices are located at 2109 Palm Avenue, Tampa, Florida 33605 and our telephone number is (813) 754-4330. We also have offices in
Pennsylvania, Israel and the United Kingdom.

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.

Corporate Strategy

Our strategic objective is to
increase our net assets by effectuating technology transfer transactions with companies pursuant to which we receive securities or cash as compensation for the sale of technology rights. Our strategy includes the following key elements:

Develop relationships with companies through our strategic alliance program. Our strategic alliances are designed to help companies enhance
their new product pipeline through the acquisition of proprietary



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technologies primarily from universities, medical centers and federal research laboratories. We normally receive unregistered shares of common or preferred
stock or cash from companies as payment for the services we render to them under our strategic alliances. All of our technology transfer transactions are completed pursuant to our strategic alliance agreements with our clients.

Execute technology transfer transactions through our U2B® process. To effectuate a technology transfer transaction, we will typically create a newly formed company to acquire a new technology from
a university, medical center or federal research laboratory and then sell this newly formed company to our client company for securities or, to a lesser extent, cash. We call this technology transfer process U2B®. It is our plan that the shares we receive in these exchanges will, in the course of
our business, be sold for cash or other assets.

A benefit of effectuating technology transfer transactions through our U2B® investment process is that such transactions do not
result in a current taxable event for us for income tax purposes. We have not acquired, and do not currently intend to acquire a new technology from a university, medical center and federal research laboratory in connection with our U2B® process without the prior agreement of our client
company to subsequently acquire such new technology from us.

Continue to build strong relationships with research institutions. In
order to provide us access to new technologies, we have entered into agreements with universities and research centers worldwide. We intend to continue to build on these relationships and create new relationships with additional universities and
research centers.

Provide strategic services and products to companies and research institutions. We seek to provide companies and
research institutions with a full range of complementary technology transfer related services and products including the following:



| |  |  | KnowledgeExpress.com WebsiteUsed by technology transfer, intellectual property, licensing and business development professionals in universities,
corporations and government agencies for access to a comprehensive information platform combining business development and technology resources with expert search and report generation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pharma-Transfer.com WebsiteTracks the research and development efforts of universities, research institutions and life science companies in order to
locate and deliver advanced technology acquisition opportunities to corporate subscribers in the pharmaceutical industry.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TechEx.com WebsiteUsed by technology transfer and research professionals to efficiently exchange biomedical licensing opportunities and innovations
available for partnering. This exchange was developed by Yale University.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Uventures.com WebsiteAn Internet-based exchange primarily used for the marketing of physical science technologies developed at universities and
research organizations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | UTEK Intellectual Capital Consulting (ICC)Provides strategic intellectual property consulting services to aid our client companies in identifying,
assessing, protecting and leveraging their intellectual property assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pursue complementary acquisitions. Many
of the products and services we offer to companies were acquired by us through strategic acquisitions. We may seek to make additional acquisitions of related or synergistic businesses in the future. In considering whether to purchase a company, we
evaluate a number of factors including reputation in the industry, the ability to assist our existing business units, quality of service provided, purchase price, strength of ties and relationships with client companies, universities and research
centers, intellectual property and other strategic partners.



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Leverage the experience and relationships of our management team. Our goal is to utilize our
experience in the field of technology transfer to grow our net assets. We have assembled a management team which has extensive experience in the field of technology transfer. Our management team has experience in negotiating, structuring and
consummating technology transfers. We have approximately nine years of experience in the technology transfer business and have executed more than 80 technology transfers.

Business Model

Technology Transfer Process

Our technology transfer process generally follows a specific series of steps, which our management believes provides the greatest opportunity for creating
value for our client companies. This process is designed to search and when appropriate, transfer technologies from research institutions to our client companies.

Our technology transfer process generally involves the following steps:



| | 1. | We enter into a strategic alliance agreements with client companies to learn about their technology needs and identify new discoveries that they may want to acquire.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Our scientific team works with our client companies to create a profile describing the new technologies they would like to acquire.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



| | 3. | Using our relationships with universities and research laboratories worldwide, combined with our database of over 35,000 technologies available for immediate license: we search,
filter and present to our client companies what our science team feels are the best two to three possible discoveries per month which are available for immediate license.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Once we identify the technologies, we assist our strategic alliance client companies in conducting their own due diligence on the technologies.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | If a client company wishes to acquire the presented technology, UTEK will provide a term sheet describing the transaction. Upon mutual agreement of terms, UTEK will then seek to
purchase the technology with our own capital and subsequently sell, or transfer the technology to our client company for unregistered stock or cash.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | If needed, UTEK can also provide additional resources at the time of transfer to help accelerate the commercialization of new products based on the transferred technology. These may
include pre-paid sponsored research agreements to advance the technology, pre-paid consulting agreements with the inventor(s) of the technology and financing for prototype development and product launch.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Often, the process does not end once the first technology transfer is complete. We continue, per our client companys needs and specifications, to present several technologies
each month throughout the term of the strategic alliance agreement.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Many of the client companies with which we engage in
such transactions frequently have little or no prior operating history. We seek to limit the downside potential of working with such client companies by, among other things, requiring that such client companies pay us a premium over our cost for the
new technologies they acquire from us in connection with the technology transfer.

Client Company Technology Selection

We conduct technology transfers with client companies that our management believes are positioned to benefit from the acquisition
of new technology. Prior to completing a technology transfer with a client company, our management and, to the extent it is deemed to be advisable by our management, our Scientific Advisory Council will review the scientific merit and risks of the
potential technology transfer. For more information about our Scientific Advisory Council, see BusinessScientific Advisory Council.



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When we assist a client company in evaluating a new technology, we review the technology to make sure
that it meets some or all of the following 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; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the technology should be socially responsible (i.e., not intended for destructive or harmful purposes).
| | - |  | -------------------------------------------------------------------------------------------------------

In addition, we consider some or all of the following additional matters in connection with our decision to conduct a technology transfer:



| |  |  | industry trends;
| | - |  | ----------------



| |  |  | financial requirements to commercialize the technology;
| | - |  | -------------------------------------------------------



| |  |  | competition; and
| | - |  | ----------------



| |  |  | the operating record and quality of the entrepreneurial group associated with the client company.
| | - |  | -------------------------------------------------------------------------------------------------

If, in our managements view, a technology meets some or all of the criteria discussed above, then we will commence negotiations with the technology
developer to arrange for a license of the technology. Normally, we seek to acquire a worldwide exclusive license for the fields of use that are important for our client company. These licenses usually have an upfront fee, royalty provision, and
minimum annual royalties. Pursuant to the terms of these 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 useful life of the intellectual
property underlying the license. Our management will review license agreements and advise our client companies as to license terms and requirements.

Current Investment Portfolio

As of December 31, 2006, we had investments of approximately $37.9 million at
value, including securities in over 60 portfolio companies. Our transactions to date have been primarily with thinly traded public companies and select private companies. As of December 31, 2006, all of the securities that we have received in
connection with our strategic alliance agreements and technology transfer transactions have been subject to legal restrictions on resale or are otherwise less liquid than public companies which have actively traded securities. As a result, our
ability to sell or otherwise transfer the securities we hold is limited.

Scientific Advisory Council

The principal purpose of our Scientific Advisory Council is to assist our management in the evaluation of new technologies. Our Scientific Advisory
Council is comprised of experts in a broad range of scientific, medical and engineering disciplines.

Determination of Net Asset Value

Quarterly Net Asset Value Determination

We
determine the net asset value per share of our common stock quarterly. We disclose these net asset values in the periodic reports we file with the SEC. The net asset value per share of our 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, 2006, approximately 74% of our
net assets were in 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



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market quotation is readily available and (ii) for all other securities and assets, fair value as determined in good faith by our Board of Directors.
Since there is typically no readily available 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 considers valuation appraisals provided by independent valuation service providers. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value
of our investments determined in good faith by our Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

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 hold. 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 company has appreciated in value and, therefore, our equity security has
also appreciated in value, where appropriate.

With respect to equity securities in private 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 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.

We have retained an independent valuation service provider, Klaris, Thomson & Schroeder, Inc., to supply us with quarterly valuations of our
portfolio of investments. Our Board of Directors uses these valuations to aid it in its determination of the fair value of our investments. Our Board of Directors retains its responsibility for determining the fair value of our portfolio of
investments.

Determinations in Connection with Offerings

In connection with each offering of shares of our common stock, our Board of Directors or a committee thereof is required to make the determination that we are not selling shares of our common stock at a price below
the then current net asset value of our common stock at the time at which the sale is made. Our Board of Directors considers the following factors, among others, in making such determination:



| |  |  | the net asset value of our common stock disclosed in the most recent periodic report we filed with the SEC;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | our managements assessment of whether any material change in the net asset value of our common stock has occurred (including through the realization of gains
on the sale of our portfolio securities) from the period beginning on the date of the most recently disclosed net asset value of our common stock to the period ending two days prior to the date of the sale of our common stock; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the magnitude of the difference between the net asset value of our common stock disclosed in the most recent periodic report we filed with the SEC and our
managements assessment of any material change in the net asset value of our common stock since the date of the most recently disclosed net asset value of our common stock in the proposed offering.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Importantly, this determination does not require that we calculate the net asset value of our common
stock in connection with each offering of shares of our common stock, but instead it involves the determination by our Board of Directors or a committee thereof that we are not selling shares of our common stock at a price below the then current net
asset value of our common stock at the time at which the sale is made.

Moreover, to the extent that there is even a remote possibility
that we may (i) issue shares of our common stock at a price below the then current net asset value of our common stock at the time at which the sale is made or (ii) trigger the undertaking (which we are required to provide in certain
registration statements we may file from time to time with the SEC) to suspend the offering of shares of our common stock if the net asset value of our common stock fluctuates by certain amounts in certain circumstances until the prospectus relating
to such offering is amended, our Board of Directors will elect, in the case of clause (i) above, either to postpone the offering until such time that there is no longer the possibility of the occurrence of such event or to undertake to
determine the net asset value of our common stock within two days prior to any such sale to ensure that such sale will not be below our then current net asset value, and, in the case of clause (ii) above, to comply with such undertaking or to
undertake to determine the net asset value of our common stock to ensure that such undertaking has not been triggered.

These processes and
procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section, and these records will be maintained with other records we are required to maintain under the
1940 Act.

Financial Information about Financial Segments and Geographic Areas

See Note 12 Segment Reporting to our audited consolidated financial statements under Item 8. Financial Statements and Supplementary
Data in this Annual Report on Form 10-K for information about our reportable segments and geographic areas.

Employees

As of February 1, 2007, we had 48 employees. We believe our relations with our employees are good.

Regulation

We have elected to be regulated as a BDC
under the 1940 Act. Pursuant to the 1940 Act, a BDC must be organized in the United States for the purpose of investing in or lending to private or thinly traded public companies and making managerial assistance available to them. A BDC may use
capital provided by public shareholders and from other sources to invest in long-term, private investments in businesses.

As a BDC, we may
not acquire any asset other than qualifying assets unless at the time we make the acquisition, the value of our qualifying assets represent at least 70% of the value of our total assets. The principal categories of qualifying assets
relevant to our business are:



| |  |  | Securities in an eligible portfolio company that are purchased in transactions not involving any public offering. An eligible portfolio company is defined under the
1940 Act to include any issuer that:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | is organized and has its principal place of business in the U.S.;
| | - |  | -----------------------------------------------------------------



| |  |  | is not an investment company or a company operating pursuant to certain exemptions under the 1940 Act, other than a small business investment company wholly owned
by a BDC; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | does not have any class of securities listed on a national securities exchange.
| | - |  | -------------------------------------------------------------------------------



| |  |  | Securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants, or
rights relating to those securities; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Cash, cash items, government securities, or high quality debt securities (as defined in the 1940 Act), maturing in one year or less from the time of investment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

To include certain securities described above as qualifying assets for the purpose of the 70% test, a business
development company must offer to make available to the issuer of those securities significant managerial assistance such as providing guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio
company. We offer to provide managerial assistance to each of our portfolio companies.

As a BDC, we are required to meet a coverage ratio
of the value of total assets to total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 200%. We may also be prohibited under the 1940 Act from knowingly participating in certain
transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

Except as described below or otherwise permitted by the 1940 Act, we are not able to issue and sell our common stock at a price below our net asset value per share. We may, however, sell our common stock, warrants,
options or rights to acquire our common stock, at a price below the net asset value of the common stock if our Board of Directors determines that such sale is in our best interests and that of our stockholders, and our stockholders approve such
sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing
commission or discount). We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to applicable requirements of the 1940 Act.

The 1940 Act prohibits us from acquiring (i) more than 3% of the total outstanding shares of another investment company; (ii) shares of another
investment company having an aggregate value in excess of 5% of the value of our total assets; or (iii) shares of another registered investment company and all other investment companies having an aggregate value in excess of 10% of the value
of our total assets. Subsequent to our acquisition of shares of common stock in HydroFlo, Inc., we became aware that HydroFlo, Inc. was a closed-end management investment company that had elected to be treated as a BDC under the 1940 Act. Because
our ownership of HydroFlo, Inc. exceeded certain of the limits set forth above, we made a gift of 5.1 million shares of HydroFlo, Inc.s common stock to certain nonprofit organizations during the year ended December 31, 2006. The fair
market value of such shares immediately prior to such gift was approximately $663,000. As a result, we recorded an expense in the amount of $663,000, which is included in general and administrative expenses in the accompanying statement of
operations for the year ended December 31, 2006. We have also taken the following corrective actions to limit the likelihood that such an event will occur in the future. These actions include (i) apprising all members of our management
team of these restrictions; (ii) augmenting our compliance policies and procedures to require that such persons take certain steps to discern whether a prospective client company is an investment company and (iii) amending our standard
strategic alliance and technology transfer documentation to include a statement to be provided by each prospective client company as to whether it is an investment company. As of December 31, 2006, we owned approximately 1% of HydroFlo,
Inc.s total outstanding shares of common stock, and HydroFlo, Inc. accounted for less than 0.1% of our net assets.

Our Board of
Directors has appointed a chief compliance officer pursuant to the requirements of the 1940 Act. We are periodically examined by the SEC for compliance with the 1940 Act.

As with other companies regulated by the 1940 Act, a BDC 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 us against larceny and embezzlement.
Furthermore, as a BDC, we are prohibited



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from protecting any director or officer against any liability to our company or our shareholders arising from willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such persons office.

As required by the 1940 Act, we
maintain a code of ethics that establishes procedures for personal investment and restricts certain transactions by our personnel. Personnel subject to the code ethics may invest in securities for their personal investment accounts, so long as such
investments are made in accordance with the codes requirements.

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 vote of a majority of the outstanding voting securities, as defined in the 1940 Act.

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 BDCs that elect to be treated as regulated investment companies under the Internal Revenue Code 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 basis and then as gain
from the sale or exchange of property.

Competition

The technology transfer business is highly competitive. 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, including IP Group, Competitive Technologies, British Technology Group and many private firms, some of which are much larger and have significantly greater
financial resources than we do. In addition, these companies will be competing with us to acquire technologies from universities and government research laboratories. We also compete against large companies that seek to license university-developed
technologies for themselves. 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 to potential client companies. We
believe we have developed a competitive advantage by assembling a large, robust database of university discoveries available for license combined with our experience in technology transfer. In addition, we have developed a search engine for
university discoveries that facilitate the finding of relevant new discoveries for our client companies. Also, we believe that our U2B® model makes it easier for companies of all sizes to acquire technologies from universities and research institutions.

Item 1A.Risk Factors

Investing in our common stock involves a high degree of risk.
As a result, there can be no assurance that we will achieve our strategic objective. You should consider carefully the risks described below. In addition to the risk factors described below, other factors that could cause actual results to differ
materially include:



| |  |  | changes in the economy;
| | - |  | -----------------------



| |  |  | risk associated with possible disruption in our operations due to terrorism;
| | - |  | ----------------------------------------------------------------------------



| |  |  | future regulatory actions and conditions in our operating areas; and
| | - |  | --------------------------------------------------------------------



| |  |  | other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.
| | - |  | ---------------------------------------------------------------------------------------------------------------



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We may not be able to sell the securities we receive in connection with our strategic alliance agreements and
technology transfers for an amount equal to the revenue we previously recognized in connection with such transactions.

We recognize
revenue in connection with our strategic alliance agreements and technology transfers in an amount equal to the fair value of the securities we receive in connection with such transactions. With respect to our strategic alliance agreements, we
recognize such revenue as earned in accordance with the contractual terms of each strategic alliance agreement. With respect to our technology transfers, we recognize such revenue upon the consummation of each technology transfer. Because the
securities we receive in connection with such transactions are subject to legal restrictions on resale and mainly issued by thinly traded public companies or private companies, our ability to sell such securities may be limited. Given these facts as
well as the subjective judgments and estimates inherent in fair value accounting, we may not be able to sell the securities we receive in connection with our strategic alliance agreements and technology transfers for an amount equal to the revenue
we previously recognized in connection with such transactions.

Our quarterly and annual results could fluctuate significantly.

Our 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 our performance in future quarters and
years.

Our investment portfolio is highly concentrated in a limited number of portfolio companies and, as a result, our financial results are largely
dependent upon the performance of these companies.

Our investment portfolio is highly concentrated in a limited number of portfolio
companies and, as a result, our financial results are largely dependent upon the performance of these companies. As a result, if one or more of these companies fails to perform as expected, our financial results could be negatively affected.

Our portfolio companies are development stage companies dependent upon the successful commercialization of new technologies. Each of our portfolio
companies is subject to a high degree of risk, and we may not be able to sell securities we receive in connection with our strategic alliances or technology transfers.

We enter into strategic alliance and technology transfer agreements with 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 become 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
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 not be able to sell the securities
we receive in connection with our strategic alliances or technology transfers if our portfolio companies are not successful.

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

Our portfolio companies depend upon the research activities of universities, medical research centers and federal research laboratories. Neither we, nor
our portfolio companies, have any control over the research



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activities of universities, medical research centers and federal research laboratories. As neither we nor our portfolio companies provide supervision of any
universities, medical research centers and federal research laboratories, we cannot ensure that the research will be done properly and that the results, which we may license, will be reproducible. In addition, we have no control over what types of
technologies are presented to us by universities, medical research centers and federal research laboratories for evaluation and commercial development. Further, the licenses to technologies that our portfolio companies obtain may be non-exclusive.

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 a portfolio company
could acquire the rights to a technology that is currently or is subsequently made obsolete by other technological developments. If this were to occur, we may be unable to sell or otherwise dispose of the securities we received in connection with
our strategic alliance and technology transfer transactions with such companies.

The patents on the technologies that our portfolio companies license
may infringe upon the rights of others, and patent applications that have been 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 to a technology 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, medical centers 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. If any such events were to occur, we may be unable to sell or otherwise dispose of the securities we received in connection with our strategic alliance and technology transfer transactions with such companies.

Technologies that have been developed with funding from the U.S. 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 U.S. 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 U.S. In
addition, 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.

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 mainly thinly
traded public companies or private companies, and we acquire securities in our portfolio companies in private transactions. As a result, substantially all of the securities we hold in our portfolio companies are subject to legal restrictions on
resale. Furthermore, our ability to sell the securities in our portfolio may be limited by, and subject to, the lack of or limited nature of a trading market for such securities. 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.



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We are dependent on sales transactions, structured as tax-free exchanges, to sell the new companies we form to acquire
new technologies. A change in the Internal Revenue Code affecting tax-free exchanges could limit our ability to effectuate such transactions.

To effectuate a technology transfer transaction, we typically create a newly formed company to acquire a new technology from a university, medical center or federal research laboratory and then exchange the securities of such newly formed
company for securities in the company that acquires such newly formed company and the technology held by such newly formed company. We call this unique technology transfer process U2B®. We anticipate that most, if not all, of such transactions will be structured as
tax-free exchanges under Section 368 of the Internal Revenue Code. A benefit of structuring our technology transfer transactions as tax-free exchanges under Section 368 is that such transactions do not result in a current taxable event for
us for income tax purposes. If Section 368 were to be amended so that we were no longer able to structure our technology transfer transactions as tax-free exchanges, we may be able to effectuate our technology transfer transactions on
commercially reasonable terms. In such event, we may be required to significantly alter the use of our U2B® investment process, which could have a significant negative impact on our business and financial results.

The agreements we have with universities, medical research centers and federal research laboratories do not guarantee that such entities will grant licenses to us or other companies.

The agreements that we have entered into with universities, medical research centers and federal research laboratories 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, the university, medical research center or federal research
laboratory will grant a license to us or other companies. As a result, we may expend time and resources evaluating a technology and not be able to secure a license to such technology.

We are dependent upon and have little or no control over the efforts of portfolio companies to successfully commercialize the acquired technologies or to retain the licenses to such technologies.

We receive common stock from our client companies based upon the mutually agreed upon values of the new companies we form to acquire new technologies,
their licensed technology and the portfolio companies. We then intend to sell the securities that we acquire in exchange for our newly formed companies to acquire new technologies 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 value of the portfolio companies that acquire our newly formed companies to acquire new technologies will be dependent upon
successfully commercializing the technologies they acquire. We do not have control over the portfolio companies that acquire our newly formed companies to acquire new technologies. 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
need additional financing which they are unable to secure and which 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 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 cash outlay in connection with our strategic alliance and technology transfer transactions or that our portfolio companies will not take actions that could be detrimental to us.

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 cash outlay in connection with our strategic
alliances and technology transfers transactions 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



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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.

Substantially all our portfolio investments are recorded at fair value as determined in good faith by our Board of Directors, and as a result, there is uncertainty
regarding the value of our portfolio investments.

At December 31, 2006 and December 31, 2005, investments amounting to $37.9
million or 74% of our net assets and $38.7 million or 87% of our net assets, respectively, have been valued at fair value as determined by our Board of Directors. Pursuant to the requirements of the 1940 Act, our Board of Directors is responsible
for determining in good faith the fair value of our investments for which market quotations are not readily available. Because there is typically no readily available market value for the investments in our portfolio, our Board of Directors
determines in good faith the fair value of these investments pursuant to a valuation policy and a consistently applied valuation process. 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 hold. 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.

We adjust quarterly the valuation of our portfolio to reflect the Board of Directors determination of the fair
value of each investment in our portfolio. Any changes in fair value are recorded in our statement of operations as Change in net unrealized appreciation (depreciation) of investments. As a result, the value of our portfolio securities
and earnings change significantly from quarter to quarter.

Our business depends on key personnel.

We rely on, and will continue to be substantially dependent upon, the continued services of our management, principally our Chief Executive Officer and
Chairman, Clifford M. Gross, Ph.D., our Chief Operating Officer, Douglas Schaedler, and our Chief Financial Officer, Carole R. Wright. We also depend upon our managements key contacts with universities, medical research centers and federal
research laboratories to maintain our access to new technologies and our relationships with companies in the private sector in order to effectuate the sale of the new companies we form to acquire new technologies. Therefore, a change in our
executive management team could have a negative impact on the company.

Additional equity or debt financing may not be available to our portfolio
companies, which could result in our losing our cash outlay in connection with our strategic alliance and technology transfer transactions with the portfolio company if the portfolio company fails.

We expect that many of our portfolio companies will require additional equity or debt financing to ensure their continued viability. The amount of
additional financing needed will depend upon the maturity and objectives of the particular portfolio company. The availability of financing is generally a function of conditions that are beyond the control of our portfolio companies. We cannot
assure you that our portfolio companies will be able to predict accurately the future financing requirements necessary for their success or that additional financing will be available to our portfolio companies from any source. If additional equity
or debt financing is not available, some of our portfolio companies may be forced to cease operations, which could adversely affect our success and result in the loss of a substantial portion or all of our cash outlay in connection with our
strategic alliance and technology transfer transactions with the portfolio company.

Changes in the laws or regulations that govern us could have a
material impact on our operations.

Any change in the laws or regulations that govern our business could have a material impact on us or
on our operations. Laws and regulations may be changed from time to time, and the interpretations of the relevant laws and regulations also are subject to change.



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We are subject to certain risks associated with our foreign operations and investments.

We have operations in the United Kingdom and Israel and make investments in foreign companies. As of December 31, 2006, approximately 1% of our
assets were comprised of assets in foreign operations and investments in foreign companies.

Certain risks are inherent in foreign
operations, including:



| |  |  | difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | foreign customers may have longer payment cycles than customers in the U.S.;
| | - |  | ----------------------------------------------------------------------------



| |  |  | tax rates in certain foreign countries may exceed those in the U.S., and foreign earnings may be subject to withholding requirements, exchange controls or other
restrictions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic and political conditions in countries where we operate may have an adverse effect on our operations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | exposure to risks associated with changes in foreign exchange rates;
| | - |  | --------------------------------------------------------------------



| |  |  | difficulties associated with managing a large organization spread throughout various countries;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | difficulties in enforcing intellectual property rights; and
| | - |  | -----------------------------------------------------------



| |  |  | required compliance with a variety of foreign laws and regulations.
| | - |  | -------------------------------------------------------------------

Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in foreign exchange rates, exchange control regulations,
political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges,
brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

As we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other
risks. We cannot assure you that these and other factors will not have a material adverse effect on our international operations or our business as a whole.

Our common stock may not continue to trade at a premium to our net asset value.

Our common stock continues to trade in
excess of our net asset value. See Note 7 Selected Per Share Data and Ratios to our consolidated financial statements included in this Form 10-K. There can be no assurance, however, that our common stock will continue to trade at a
premium to our net asset value. The possibility that our common stock will trade at premiums that are unsustainable over the long term is separate and distinct from the risk that our net asset value will decrease.

We may issue shares of our common stock at a discount to the market price for such shares, which may put downward pressure on the market price for shares of our
common stock.

In February 2006, we issued shares of our common stock at a discount to the market price for such shares in connection
with a registered equity offering. The discount in such offering was approximately 15%. If we issue shares of our common stock at a discount to the market price for such shares, it may put downward pressure on the market price for shares of our
common stock. Such downward pressure could in turn encourage short sales or similar trading with respect to shares of our common stock, which could in itself place further downward pressure on the market price for shares of our common stock.

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

Clifford M. Gross, Ph.D., our Chief Executive Officer and Chairman, beneficially owns approximately 22% of our common stock as of December 31, 2006.
Therefore, Dr. Gross may be able to exert influence over our



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management and policies. Dr. Gross may acquire additional equity in our company in the future. The concentration of ownership may also have the effect
of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of the sale of our company and might ultimately affect the market price of
our common stock.

We may need additional capital in the future and it may not be available on acceptable terms.

We have historically relied on debt and equity financing and cash flow from the sale of our investments to fund our operations, capital expenditures and
expansion. However, we may require additional capital in the future to fund our operations, or respond to competitive pressures or strategic opportunities. We cannot assure you that additional financing will be available on terms favorable to us, or
at all. In addition, the terms of available financing may place limits on our financial and operating flexibility. If we are unable to obtain sufficient capital in the future, we may:



| |  |  | be forced to reduce our operations;
| | - |  | -----------------------------------



| |  |  | not be able to expand or acquire complementary businesses; and
| | - |  | --------------------------------------------------------------



| |  |  | not be able to develop new services or otherwise respond to changing business conditions or competitive pressures.
| | - |  | ------------------------------------------------------------------------------------------------------------------

Regulations governing our operation as a business development company will affect our ability to, and the way in which we, raise additional capital.

We may require additional capital in the future to fund our operations, or respond to competitive pressures or strategic opportunities. We may acquire
additional capital from the following sources:

Senior Securities and Other Indebtedness. We may issue debt securities or preferred
stock and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities, up to the maximum amount permitted by the 1940 Act. If we issue senior securities, including debt or preferred stock, we will
be exposed to additional risks, including the following:



| |  |  | Under the provisions of the 1940 Act, we will be permitted, as a BDC, to issue senior securities only in amounts such that our asset coverage, as defined in the
1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the
nature of our leverage, repay a portion of our debt at a time when such sales and/or repayments may be disadvantageous.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | It is likely that any senior securities or other indebtedness we issue will be governed by an indenture or other instrument containing covenants restricting our
operating flexibility.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We, and indirectly, our stockholders will bear the cost of issuing and servicing such securities and other indebtedness.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Preferred stock or any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of
our common stock, including separate voting rights and could delay or prevent a transaction or a change in control to the detriment of the holders of our common stock.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additional Common Stock. We are not generally able to issue and sell our common stock at a price below our net asset value per share. We may,
however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below our net asset value of the common stock if our Board of Directors determines that such sale is in our best interests and that of our
stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market
value of such securities (less any



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distributing commission or discount). We may also make rights offerings to our stockholders at prices per share less than the net asset value per share,
subject to applicable requirements of the 1940 Act. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time
would decrease and they may experience dilution. Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all.

Our common stock price may be volatile.

The trading
price of our common stock has fluctuated significantly and may continue to fluctuate substantially, depending on many factors, many of which are beyond our control and may not be directly related to operating performance. These factors include the
following:



| |  |  | price and volume fluctuations in the overall stock market from time to time;
| | - |  | ----------------------------------------------------------------------------



| |  |  | significant volatility in the market price and trading volume of securities of BDCs or technology transfer companies;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | changes in regulatory policies, accounting or tax guidelines with respect to BDCs or technology transfer companies;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | actual or anticipated changes in our earnings or fluctuations in our operating results;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | actual or anticipated changes in the value of our investments;
| | - |  | --------------------------------------------------------------



| |  |  | changes in financial reporting requirements;
| | - |  | --------------------------------------------



| |  |  | general economic conditions and trends;
| | - |  | ---------------------------------------



| |  |  | loss of a major funding source; or
| | - |  | ----------------------------------



| |  |  | departures of key personnel;
| | - |  | ----------------------------



| |  |  | changes to the market or shareholders acceptance of our unique technology transfer business;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | the consummation of mergers or acquisitions of related businesses.
| | - |  | ------------------------------------------------------------------

Item 1B.Unresolved Staff Comments

On May 19, 2006, we filed pre-effective
amendment No. 1 to our registration statement on Form N-2 (File No. 333-133093) with the SEC. On June 23, 2006, the staff of the SECs Division of Investment Management (the SEC staff) sent us a letter commenting on
the Form N-2 registration statement and requesting that we answer their questions and provide additional information. We exchanged correspondence with the members of the SEC staff and provided them with additional information.

As of the date of this annual report on Form 10-K, there is one outstanding accounting comment on the Form N-2 registration statement that we believe is
material. The outstanding accounting comment relates to the manner by which we recognize revenue in connection with our strategic alliance agreements and technology transfer transactions. Specifically, we typically receive unregistered securities
from our client companies as payment for the services we render to them under our strategic alliance agreements and technology transfer transactions. We record revenue in connection with such agreements and transactions based on the fair value of
the securities received. To date, the SEC staffs comments relating to the outstanding accounting issue have largely required us to demonstrate that the above-described revenue recognition policy is in accordance with generally accepted
accounting principles (GAAP). In this regard, our management, board of directors, audit committee, registered independent public accounting firm and an outside accounting consultant have all concluded, and represented to the SEC staff,
that the above-described revenue recognition policy is not only consistent with GAAP and related SEC guidance, but also provides the clearest and most transparent understanding to all users of our financial statements. However, there can be no
assurance that the SEC staff will concur with this assessment. If the SEC staff ultimately does not concur with this view, then we may be required to alter the above-described revenue recognition policy and our financial reporting.



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Item 2.Properties

Our principal office is located in Tampa, Florida. We lease this
office space from Ybor City Group, Inc., a subsidiary of UTEK Real Estate Holdings, Inc., one of our portfolio companies. This property is adequate for our current domestic office needs and the ongoing expansion of our sales force. If our office
requirements increase beyond our current expectations, additional office space is available for lease in this same location.

We also lease
office space in Pennsylvania, Israel and the United Kingdom. These properties are adequate for our current and future requirements since no expansions are planned in these areas.

Item 3.Legal Proceedings

We may be a party from time to time in certain lawsuits in
the normal course of our 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, 2006.



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PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock and Dividends

Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, CO
80401; 303-262-0600, serves as transfer agent for our common stock.

Our shares of common stock trade on the American Stock Exchange (AMEX)
and the AIM market of the London Stock Exchange under the symbol UTK. The following table reflects the high and low closing prices for our common stock as reported on the AMEX and the cash dividends declared per common share for the
period indicated:



|                 |  |      |       |     |   |           |  |   |     
|---------------- |  | ---- | ----- | --- | - | --------- |  | - | ----
|                 |  | High |       | Low |   | Dividends
|Fiscal year 2006 |  |      |       |     |   |           |  |   |     
|First quarter    |  | $    | 14.50 |     | $ | 11.90     |  | $ | 0.02
|Second quarter   |  | $    | 20.40 |     | $ | 12.65     |  |   |    
|Third quarter    |  | $    | 23.80 |     | $ | 18.22     |  |   |    
|Fourth quarter   |  | $    | 19.99 |     | $ | 10.78     |  | $ | 0.02
|Fiscal year 2005 |  |      |       |     |   |           |  |   |     
|First quarter    |  | $    | 15.75 |     | $ | 14.86     |  |   |    
|Second quarter   |  | $    | 15.45 |     | $ | 13.50     |  |   |    
|Third quarter    |  | $    | 14.05 |     | $ | 12.29     |  |   |    
|Fourth quarter   |  | $    | 14.09 |     | $ | 13.28     |  |   |    

We had approximately 140 stockholders of record at February 26, 2007. The net asset value per
share of our common stock at December 31, 2006 was $5.71.

Our Board of Directors has sole discretion in determining whether to
declare and pay cash dividends in the future. The declaration of cash dividends will depend on our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board of Directors. Our ability to
pay cash dividends in the future could be limited or prohibited by regulatory requirements and the terms of financing agreements that we may enter into or by the terms of any preferred stock that we may authorize and issue.

Securities Authorized For Issuance under Equity Compensation Plans

As of December 31, 2006, we had two stock option plans under which shares of our common stock were authorized for issuance.



|                                                           |  |                                                                                          |  |                                                                           |       |                                                                                                                                       |        
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                           |  | Number of securities to beissued upon exercise ofoutstanding options, warrantsand rights |  | Weighted-average exerciseprice of outstanding options,warrants and rights |       | Number of securitiesremaining available forfuture issuance under equitycompensation
plans(excluding securitiesreflected in column (a)
|Plan category                                              |  | (a)                                                                                      |  | (b)                                                                       |       | (c)                                                                                                                                  
|Equity compensation plans approved by security holders     |  | 582,050                                                                                  |  | $                                                                         | 13.18 |                                                                                                                                       | 593,445
|Equity compensation plans not approved by security holders |  |                                                                                         |  |                                                                           |      |                                                                                                                                       |       
|Total                                                      |  | 582,050                                                                                  |  | $                                                                         | 13.18 |                                                                                                                                       | 593,445



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Performance Graph

The following graph shows a comparison of the five-year cumulative total return, assuming the reinvestment of dividends, on our common stock with that of the Russell Microcap Index and the Companys peer group
including British Technology Group plc, Competitive Technologies, Inc., IP Group plc, and Sagentia Group AG. The graph assumes $100 was invested on December 31, 2001 in our common stock, the Russell Microcap Index companies, and the companies
in the peer group. Note that historic stock price performance is not necessarily indicative of future stock price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

AMONG UTEK, RUSSELL MICROCAP INDEX AND THE COMPANYS PEER GROUP

LOGO



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Item 6.Selected Financial Data

The following table presents our selected consolidated
financial and other data and has been derived from our audited financial statements for the years ended December 31, 2006, 2005, 2004, 2003, and 2002. The information below should be read in conjunction with Item 7. 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 annual report on Form 10-K.

Our acquisitions have not had a material effect on the trends reflected in the selected financial data.

Consolidated Statement of Operations Data:



|                                                    |  |                         |            |      |   |            |  |      |           |      |   |            |  |   |          
|--------------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- |  | ---- | --------- | ---- | - | ---------- |  | - | ---------
|                                                    |  | Year Ended December 31,
|                                                    |  | 2006                    |            | 2005 |   | 2004       |  | 2003 |           | 2002
|Income from operations                              |  | $                       | 56,952,937 |      | $ | 22,743,823 |  | $    | 7,188,615 |      | $ | 3,805,177  |  | $ | 3,385,335
|Net income from operations                          |  |                         | 19,944,207 |      |   | 5,887,830  |  |      | 942,722   |      |   | 180,568    |  |   | 153,643  
|Diluted net income from operations per common share |  | $                       | 2.27       |      | $ | 0.80       |  | $    | 0.15      |      | $ | 0.04       |  | $ | 0.04     
|Weighted average shares:                            |  |                         |            |      |   |            |  |      |           |      |   |            |  |   |          
|Diluted                                             |  |                         | 8,786,605  |      |   | 7,325,312  |  |      | 6,098,537 |      |   | 4,266,918  |  |   | 3,921,535
|Cash dividends declared per common share            |  | $                       | 0.04       |      |   |           |  |      |          |      |   |           |  |   |         
|                                                    |  |                         |            |      |  
|                                                    |  | 2006                    |            | 2005 |   | 2004       |  | 2003 |           | 2002
|Balance Sheet Data:                                 |  |                         |            |      |   |            |  |      |           |      |   |            |  |   |          
|Total assets                                        |  | $                       | 53,040,810 |      | $ | 49,005,960 |  | $    | 25,879,64 |      | $ | 12,549,448 |  | $ | 7,863,140
|Long-term obligations                               |  |                         |           |      |   |           |  |      |          |      |   | 847,890    |  |   |         
|Net asset per share                                 |  | $                       | 5.71       |      | $ | 5.58       |  | $    | 3.85      |      | $ | 2.33       |  | $ | 1.87     

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

Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with our
consolidated financial statements and the notes thereto included elsewhere in this annual report on Form 10-K. This annual report on Form 10-K contains forward-looking statements regarding the plans and objectives of management for future
operations. These forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words may,
will, should, expect, anticipate, estimate, believe, intend or project or the negative of these words or other variations on these words or comparable
terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially
from those expressed or implied by the forward-looking statements as a result of various factors.

Overview of Recent Developments

We are a market-driven technology transfer business that assists companies in identifying and acquiring technologies. 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 potential commercial development and use. Our goal is to provide our client companies an
opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical centers and federal research laboratories.



19



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##### Table of Contents

Executive Summary

Our financial condition is dependent on a number of factors including our ability to effectuate technology transfers and the performance of the equity investments that we receive in connection with these transfers.
Substantially all of our investments are in development stage and start-up companies and thinly traded public companies. These businesses are thinly capitalized, unproven, small companies that lack management depth, are dependent on new,
commercially unproven technologies and have no or a limited history of operations.

Our total assets were $53.0 million and our net assets
were $51.0 million at December 31, 2006, compared to $49.0 million and $44.4 million at December 31, 2005, respectively. Net asset value per share was $5.71 at December 31, 2006, and $5.58 at December 31, 2005. Net assets
increased by $6.5 million or approximately 15% in the year ended December 31, 2006, as compared to the year ended December 31, 2005. At the end of fiscal year 2006, we had no long-term debt, and $9.7 million in cash and cash equivalents.

Income from operations for fiscal year 2006 totaled approximately $57.0 million, as compared to $22.7 million in 2005. Net income from
operations for fiscal year 2006 totaled approximately $19.9 million as compared to $5.9 million in 2005. Net realized gains on investments, net of deferred tax effect, totaled approximately $900,000 as compared to net realized losses of $3.5 million
in 2005. In this regard, we received gross proceeds of $9.7 million in 2006 and $3.1 in 2005 in connection with the sale of the securities we received in connection with our strategic alliance agreements and technology transfer transactions. Net
change in unrealized depreciation of investments, net of deferred tax benefit, was $25.8 million in 2006 as compared to $300,000 in 2005.

Our Board of Directors declared two quarterly cash dividends of $0.02 per share during fiscal year 2006, for a total of approximately $357,000. On March 30, 2006, our Board of Directors approved a special dividend of $0.02 per share
that was paid on May 19, 2006 to shareholders of record on April 28, 2006. On December 1, 2006, our Board of Directors approved a special dividend of $0.02 per share that was paid on January 31, 2007 to shareholders of record on
January 12, 2007.

Our Board of Directors will have sole discretion in determining whether to declare and pay cash dividends in the
future. The declaration of cash dividends will depend on our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board of Directors. Our ability to pay cash dividends in the future could
be limited or prohibited by regulatory requirements and the terms of financing agreements that we may enter into or by the terms of any preferred stock that we may authorize and issue.

Recently, we have taken steps to improve the efficiency of our technology transfer business model. Some of the improvements we have made include:



| |  |  | Enhanced client acceptance procedures including the hiring of a manager of due diligence to conduct background checks on principal officers of prospective client
companies, and Executive Committee approval prior to client acquisition.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanded our scientific review team for technology due diligence;
| | - |  | -----------------------------------------------------------------



| |  |  | Improved our technology search capabilities through our expanded proprietary technology database and search engine;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Entered into Master Strategic Alliances with two investment banks - Acumen BioFin a division of Rodman and Renshaw, LLC and vFinance, Investments, Inc. which should
help us improve the quantity and diversity of our new clients as well as the availability of follow-on financing for our clients to accelerate the commercialization of technologies they may acquire from us; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Engaged C.E. Unterberg Towbin, LLC and vFinance Investments, Inc. to facilitate the sales of portions of our restricted equity positions in a more rapid and
efficient fashion following the completion of technology transfers. We anticipate this should mitigate a portion of the equity risk in our portfolio and improve cash flow.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Increase in Technology Transfers and Strategic Alliances

In 2006, we increased the number of active strategic alliance clients and consequently the number of completed technology transfers:



| |  |  | During 2006, we signed 44 new strategic alliance agreements in which we received unregistered securities valued at approximately $2.7 million, as compared to 36 new
strategic alliances in which we received unregistered securities valued at $1.6 million for 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The completion of 29 technology transfers valued at approximately $51.2 million, as compared to 14 technology transfers valued at approximately $18.1 million for
2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity Financing

On February 8, 2006, we sold 816,330 shares of common stock pursuant to a shelf registration and received gross proceeds of $10 million, less underwriting discounts of $700,000.

Portfolio Activity

The following is a list of
significant changes in our portfolio during the year ended December 31, 2006:



| |  |  | The sale of some or all of our shares in Z Trim Holdings (formerly Circle Group Holdings, Inc.), Xethanol Corporation, Sequiam Corporation, Israel Technology
Acquisition Corp., Fortress America Acquisition Corporation, Harborlight Diversified Fund, LP, American Soil Technologies, Inc., NutraCea International Corporation and various other portfolio companies for approximately $9.7 million, which resulted
in realized gains of $900,000 (net of income tax);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The completion of 29 technology transfers valued at approximately $51.2 million;
| | - |  | --------------------------------------------------------------------------------



| |  |  | The completion of 44 new strategic alliance agreements from which we received unregistered securities valued at approximately $2.7 million;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The donation of 5.1 million shares of HydroFlo, Inc. valued at $663,000 to four nonprofit institutions;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Decrease of approximately $7.0 million in U.S. Treasuries and certificates of deposit as a result of the use of such funds for operations or investment in short
term cash equivalents: and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A net unrealized loss of $25.8 million (net of income tax) in the fair value of our investments.
| | - |  | ------------------------------------------------------------------------------------------------

Our most significant portfolio investments at December 31, 2006 were in Advanced Refractive Technologies, Inc. World Energy Solutions, Inc.,
Advanced Medical Isotope Corporation, Industrial Biotechnology Corporation, Cyberlux Corporation, American Soil Technologies, Inc., Klegg Electronics, Inc. and UTEK Real Estate Holdings, Inc. These six investments total $19.6 million in fair value
and represented 52% of our investments and 38% of net assets at December 31, 2006.

Our capital investments made in our newly formed
companies during the year ended December 31, 2006 totaled $12.9 million. Of the total capital invested in our newly formed companies during the year ended December 31, 2006, $2.1 million was expended on research and development costs, $1.2
million was expended on license and consulting fees, and $9.7 million (to assist in the acceleration of commercializing the technology) remained in our newly formed companies at the time they were sold to our portfolio companies. All of these items
are reflected in the accompanying consolidated statement of operations as acquisition of technology rights.

The net unrealized
depreciation for the year ended December 31, 2006 was mostly due to the significant write down of five of our over 60 investments in our portfolio: Industrial Biotechnology Corp., Trio Industries Group, Inc., KP Renewables, plc., UBA
Technology, Inc. and Cytodyn, Inc. While these losses were significant, failures among small cap companies are not unexpected and may occur in the future. The current portfolio is comprised of more than 60 holdings. Many of these positions are with
small capitalization companies which over time may have high failure rates due to a variety of factors. For clients that fail, UTEK may lose the entire amount of its capital spent acquiring and transferring the technology to them.

The value of our investments can fluctuate due to factors that are specific to each investment (e.g., inability to obtain additional capital, inability
to execute business model, termination of technology licenses, etc.) or to general marketplace factors.



21



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##### Table of Contents

Acquisitions and Dispositions

On March 30, 2006, we entered into an agreement and plan of acquisition with 22nd Street of Ybor City, Inc. to acquire all of its issued and outstanding shares of capital stock for an aggregate purchase price of
$2,000,000. 22nd Street of Ybor City, Inc. is a real estate holding company that owns a commercial parking facility in Tampa, Florida. UTEK acquired 100% of the outstanding shares of 22nd Street of Ybor City, Inc. through the issuance of 82,919
shares of unregistered common stock plus a cash payment of $1,000,000. The acquired business is operated by UTEK Real Estate Holding, Inc., one of UTEKs portfolio companies.

FAS 123R

Effective January 1, 2006, we adopted the provisions of Statement of Financial
Accounting Standards No. 123(R), (SFAS 123(R)) Share-Based Payment. Prior to the adoption of SFAS 123(R), we accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25,
Accounting for Stock Issued to Employees, and accordingly, recognized no compensation expense for stock option grants. Stock-based compensation of approximately $505,000 for the year ended December 31, 2006 is included in salaries and
wages in the accompanying consolidated statements of operations.

Results of Operations

Summary of Results for Years Ended December 31, 2006, 2005 and 2004

Income from Operations (Revenue)



|                                   |  |      |        |      |   |        |  |                               |       |  |                               |   |  |     |  
|---------------------------------- |  | ---- | ------ | ---- | - | ------ |  | ----------------------------- | ----- |  | ----------------------------- | - |  | --- | -
|(in thousands, except percentages) |  | 2006 |        | 2005 |   | 2004   |  | PercentChange 2006versus 2005 |       |  | PercentChange 2005versus 2004 |  
|Sale of Technology Rights          |  | $    | 51,191 |      | $ | 18,132 |  | $                             | 5,131 |  | 182                           | % |  | 253 | %
|Consulting and Other Services      |  |      | 4,950  |      |   | 4,179  |  |                               | 1,981 |  | 18                            | % |  | 111 | %
|Other Income, net                  |  |      | 812    |      |   | 433    |  |                               | 77    |  | 87                            | % |  | 462 | %
|                                   |  |      |        |      |   |        |  |                               |       |  |                               |   |  |     |  
|Income from Operations             |  | $    | 56,953 |      | $ | 22,744 |  | $                             | 7,189 |  | 150                           | % |  | 216 | %
|                                   |  |      |        |      |   |        |  |                               |       |  |                               |   |  |     |  

The increase in sale of technology rights resulted from completing twenty-nine technology
transfers during the year ended December 31, 2006 compared to the fourteen technology transfers completed during the year ended December 31, 2005. All of the income from the sale of technology rights was received in the form of equity
securities for both the year ended December 31, 2006 and 2005.

The increase in sale of technology rights resulted from completing
fourteen technology transfers during the year ended December 31, 2005 compared to the ten technology transfers completed during the year ended December 31, 2004. All of the income from the sale of technology rights was received in the form
of equity securities for both the year ended December 31, 2005 and 2004.

The increase in consulting fees and other services resulted
primarily from providing services under fourty-four new strategic alliance agreements during the year ended December 31, 2006, as compared to thirty-six during the year ended December 31, 2005. In addition, we had a higher total number of
strategic alliances in process during 2006. In the year ended December 31, 2006, we rendered services in connection with strategic alliance agreements that generated approximately $2.1 million in revenue, as compared to strategic alliance
agreements that generated approximately $1.4 million in revenue for the year ended December 31, 2005. Other consulting income for the year ended December 31, 2006 included income of $1.1 million from our subsidiaries UTEK-Europe, Ltd.,
UTEK-EKMS, Inc., and UTEKip, Ltd., as compared to $2.0 million for the year ended December 31, 2005. UTEK Information Services comprised the balance of consulting fee and other services income for 2006 and 2005. We have made a change to our
pricing structure for our strategic alliance agreements in 2007, which will likely reduce the amount of our consulting and other services revenue. The new pricing structure is expected to increase the number, quality and diversification of our
strategic alliance clients.



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##### Table of Contents

The increase in consulting fees and other services resulted primarily from providing services under
thirty-six new strategic alliance agreements during the year ended December 31, 2005, as compared to twenty during the year ended December 31, 2004. In the year ended December 31, 2005, we rendered services in connection with
strategic alliance agreements that generated approximately $1.4 million in revenue, as compared to strategic alliance agreements that generated approximately $1.0 million in revenue for the year ended December 31, 2004. Other consulting income
for the year ended December 31, 2005 included income of $2.0 million from our subsidiaries UTEK-Europe, Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd., as compared to $674,000 for the year ended December 31, 2004. UTEK Information Services
comprised the balance of consulting fee and other services income for 2005. UTEK-EKMS, Inc. and Pharma Transfer, Ltd. were purchased in the last quarter of 2004; therefore, the related income for 2004 only reflects a partial year for those
subsidiaries. UTEKip, Ltd. was purchased in January 2005; therefore, there is no related income reflected in 2004.

Of the total consulting
and other income received during the years ended December 31, 2006, 2005 and 2004, 51%, 34% and 48%, respectively, was paid in the form of equity securities and the balances were paid in cash.

The increase in our strategic alliances and technology transfers is primarily a result of an increase in the overall demand for our services and
additional alliances brought to us from outside service providers. We are growing our client base as a result of increased sales and marketing efforts and better recognition in the business community regarding the value and availability of our
services. Future technology transfer transactions will be scaled to the amount of cash available to fund such transfers.

Expenses

Acquisition of Technology Rights



|                                          |  |      |        |   |      |   |       |      |  |   |                               |   |  |                               |   |  |      |  
|----------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ----------------------------- | - |  | ----------------------------- | - |  | ---- | -
|(in thousands, except percentages)        |  | 2006 |        |   | 2005 |   |       | 2004 |  |   | PercentChange 2006versus 2005 |   |  | PercentChange 2005versus 2004 |  
|Acquisition of technology rights          |  | $    | 12,945 |   |      | $ | 4,600 |      |  | $ | 1,151                         |   |  | 181                           | % |  | 300  | %
|As a percent of sale of technology rights |  |      | 25     | % |      |   | 25    | %    |  |   | 22                            | % |  | -0-ppt                        |   |  | 3ppt |  

Acquisition of technology rights costs consist of the direct costs associated with our technology
transfers, which include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and sponsored research fees with the university or research facility
transferring the technologies. The overall increase in acquisition of technology rights from 2005 to 2006 was due to completing 15 additional technology transfers in the year ended December 31, 2006 than in 2005. The average cost per technology
transfer increased approximately $118,000 or 36% during the year ended December 31, 2006.

The overall increase in acquisition of
technology rights from 2004 to 2005 was due to completing four additional technology transfers in the year ended December 31, 2005 than in 2004. The average cost per technology transfer increased approximately $213,000 or 185% during the year
ended December 31, 2005.



23



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##### Table of Contents

The following tables provide certain information relating to the acquisition of technology rights
expenses we incurred in connection with our technology transfers during the year ended December 31, 2006:



|         |  |                                          |  |                                                  |  |                         |           
|-------- |  | ---------------------------------------- |  | ------------------------------------------------ |  | ----------------------- | ----------
|Date     |  | UTEK Client Company                      |  | Intellectual Property Acquisition Company        |  | DollarAmount ofExpenses
|01/20/06 |  | Fuel FX International, Inc.              |  | Emissions Detection Technologies, Inc.           |  | $                       | 300,000   
|01/27/06 |  | Broadcast International, Inc.            |  | Video Processing Technologies, Inc.              |  |                         | 625,000   
|01/30/06 |  | WebSky, Inc.                             |  | Strategic Wireless Solutions, Inc                |  |                         | 265,000   
|03/06/06 |  | Trio Industries Group, Inc.              |  | Ultra Fine Coating Systems, Inc.                 |  |                         | 534,000   
|03/15/06 |  | American Soil Technologies, Inc.         |  | Advanced Fertilizer Technologies, Inc.           |  |                         | 500,000   
|03/16/06 |  | Advanced Refractive Technologies, Inc.   |  | Ocular Theraputics, Inc.                         |  |                         | 400,000   
|04/03/06 |  | Trio Industries Group, Inc.              |  | Natural Adhesive Technologies, Inc.              |  |                         | 555,000   
|04/04/06 |  | Advanced Refractive Technologies, Inc.   |  | Advanced Glaucoma Technologies, Inc.             |  |                         | 399,999   
|04/05/06 |  | UBA Technology, Inc.                     |  | Intellitouch Technologies, Inc.                  |  |                         | 502,000   
|05/01/06 |  | Industrial Biotechnology Corporation     |  | Bio-Repellant Technologies, Inc.                 |  |                         | 400,000   
|05/12/06 |  | Kwikpower International Plc              |  | Hydrocarbon Synthesis Technologies, Inc.         |  |                         | 407,500   
|05/12/06 |  | Kwikpower International Plc              |  | Advanced BioEnergy Technologies, Inc.            |  |                         | 380,000   
|06/01/06 |  | Trio Industries Group, Inc.              |  | Advanced Powder Coating Technologies, Inc.       |  |                         | 550,000   
|06/12/06 |  | Kwikpower International Plc              |  | Advanced Biofuel Technologies, Inc.              |  |                         | 375,000   
|06/13/06 |  | Xethanol Corporation                     |  | Advanced Biomass Gasification Technologies, Inc. |  |                         | 450,000   
|06/20/06 |  | Klegg Electronics, Inc.                  |  | Smart Speaker Technologies, Inc.                 |  |                         | 528,628   
|07/12/06 |  | Avalon Oil & Gas, Inc.                   |  | Ultrasonic Mitigation Technologies, Inc.         |  |                         | 410,000   
|07/14/06 |  | DME Interactive Holdings, Inc.           |  | Multimedia Control Technologies, Inc.            |  |                         | 512,650   
|07/18/06 |  | Cytodyn, Inc.                            |  | Advanced Influenza Technologies, Inc.            |  |                         | 934,399   
|08/11/06 |  | NetFabric Holdings, Inc                  |  | Intrusion Detection Technologies, Inc.           |  |                         | 523,600   
|08/18/06 |  | Material Technologies, Inc.              |  | Materials Monitoring Technologies, Inc.          |  |                         | 589,000   
|08/29/06 |  | Industrial Biotechnology Corporation     |  | Advanced Pheromone Technologies, Inc.            |  |                         | 325,000   
|09/12/06 |  | Liberty Diversified Holdings, Inc.       |  | Innovative Packaging Technologies, Inc.          |  |                         | 435,000   
|09/22/06 |  | Advanced Medical Isotope Corp.           |  | Neu-Hope Technologies, Inc.                      |  |                         | 335,000   
|10/09/06 |  | World Energy Solutions, Inc.             |  | Pure Air Technologies, Inc.                      |  |                         | 593,369   
|11/01/06 |  | Klegg Electronics, Inc.                  |  | Universal Wireless Technologies, Inc.            |  |                         | 265,000   
|11/08/06 |  | Avalon Oil & Gas, Inc.                   |  | IntelliWell Technologies, Inc.                   |  |                         | 250,000   
|11/10/06 |  | Cyberlux Corporation                     |  | SPE Technologies, Inc.                           |  |                         | 375,000   
|12/06/06 |  | Cargo Connection Logistics Holding, Inc. |  | Nuclear Material Detection Technologies, Inc.    |  |                         | 225,000   
|         |  |                                          |  |                                                  |  |                         |           
|         |  |                                          |  |                                                  |  | $                       | 12,945,145
|         |  |                                          |  |                                                  |  |                         |           

The following tables provide certain information relating to the acquisition of technology rights
expenses we incurred in connection with our technology transfers during the year ended December 31, 2005:



|         |  |                                        |  |                                            |  |                         |          
|-------- |  | -------------------------------------- |  | ------------------------------------------ |  | ----------------------- | ---------
|Date     |  | UTEK Client Company                    |  | Intellectual Property Acquisition Company  |  | DollarAmount ofExpenses
|01/10/05 |  | Xethanol Corporation                   |  | Superior Separation Technologies, Inc.     |  | $                       | 110,000  
|02/22/05 |  | Health Sciences Group, Inc.            |  | Open Cell Biotechnologies, Inc.            |  |                         | 265,000  
|03/31/05 |  | Swiss Medica, Inc.                     |  | Anti-Depression Biohealth Solutions, Inc.  |  |                         | 196,673  
|06/30/05 |  | Manakoa Services Corporation           |  | Vigilant Network Technologies, Inc.        |  |                         | 655,122  
|07/18/05 |  | eLinear Corporation                    |  | Secure Voice Communications, Inc.          |  |                         | 25,000   
|08/05/05 |  | Industrial Biotechnology Corporation   |  | Advanced Bioscience, Inc.                  |  |                         | 350,174  
|08/15/05 |  | Xethanol Corporation                   |  | Xylose Technologies, Inc.                  |  |                         | 530,080  
|09/01/05 |  | Fuel FX International Inc.             |  | Emissions-Reduction Technologies, Inc.     |  |                         | 351,722  
|09/15/05 |  | INSEQ Corp.                            |  | Separation and Recovery Technologies, Inc. |  |                         | 400,000  
|09/30/05 |  | Kwikpower International Plc            |  | Biodiesel Technologies, Inc.               |  |                         | 490,799  
|10/03/05 |  | Trio Industries                        |  | Kenaf Core Technologies, Inc.              |  |                         | 350,000  
|10/12/05 |  | Fuel FX International, Inc.            |  | Emissions Analysis, Inc.                   |  |                         | 175,000  
|11/17/05 |  | Trio Industries, Inc.                  |  | Cornboard Technologies, Inc.               |  |                         | 425,000  
|12/13/05 |  | Advanced Refractive Technologies, Inc. |  | Optimetrix Technologies, Inc.              |  |                         | 275,000  
|         |  |                                        |  |                                            |  |                         |          
|         |  |                                        |  |                                            |  | $                       | 4,599,570
|         |  |                                        |  |                                            |  |                         |          



24



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##### Table of Contents

The following tables provide certain information relating to the acquisition of technology rights
expenses we incurred in connection with our technology transfers during the year ended December 31, 2004:



|         |  |                                           |  |                                           |  |                         |          
|-------- |  | ----------------------------------------- |  | ----------------------------------------- |  | ----------------------- | ---------
|Date     |  | UTEK Client Company                       |  | Intellectual Property Acquisition Company |  | DollarAmount ofExpenses
|4/30/04  |  | Zkid Network Company                      |  | Web Safe Technologies, Inc.               |  | $                       | 200,000  
|6/25/04  |  | Xethanol Corp.                            |  | Advanced Bioethanol Technologies, Inc.    |  |                         | 50,000   
|8/2/04   |  | HydroFlo, Inc.                            |  | Arsenic Removal Technologies, Inc.        |  |                         | 55,000   
|8/5/04   |  | Manakoa Services Company                  |  | Advanced Cyber Security, Inc.             |  |                         | 200,000  
|8/10/04  |  | Power3 Medical Products, Inc.             |  | Ice Technologies, Inc.                    |  |                         | 60,000   
|9/30/04  |  | Xethanol Corp.                            |  | Ethanol Extraction Technologies, Inc.     |  |                         | 55,000   
|10/25/04 |  | Health Sciences Group, Inc.               |  | Polymann Technologies, Inc.               |  |                         | 165,000  
|10/25/04 |  | Health Sciences Group, Inc.               |  | Apple Peel Technologies, Inc.             |  |                         | 165,000  
|12/17/04 |  | Bioflavorance Technology & Research, Inc. |  | Advanced Flavors and Fragrances, Inc.     |  |                         | 131,152  
|12/17/04 |  | Hydroflo, Inc.                            |  | Safety Scan Technology, Inc.              |  |                         | 70,000   
|         |  |                                           |  |                                           |  |                         |          
|         |  |                                           |  |                                           |  | $                       | 1,151,152
|         |  |                                           |  |                                           |  |                         |          

Salaries and Wages



|                                   |  |      |       |   |      |   |       |      |  |   |                               |   |  |                               |      |  |     |     
|---------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----------------------------- | - |  | ----------------------------- | ---- |  | --- | ----
|(in thousands, except percentages) |  | 2006 |       |   | 2005 |   |       | 2004 |  |   | PercentChange 2006versus 2005 |   |  | PercentChange 2005versus 2004 |     
|Salaries and wages                 |  | $    | 3,430 |   |      | $ | 2,675 |      |  | $ | 1,080                         |   |  | 28                            | %    |  | 148 | %   
|As a percent of revenue            |  |      | 6     | % |      |   | 12    | %    |  |   | 15                            | % |  | (6                            | )ppt |  | (3  | )ppt

Salaries and wages include non-sales employee and officer salaries and related benefits including
bonuses and stock-based compensation. The increase in salaries and wages for the year ended December 31, 2006 compared to the year ended December 31, 2005 is due to a number of factors. Salaries relating to six additional months of the
Knowledge Express website (acquired July 1, 2005) employees comprised $200,000; additional Knowledge Express website employees hired in 2006 of $60,000; additional accounting personnel salaries of $135,000; a $189,000 increase in salaries in
the UK; a reduction in salaries of $360,000 related to moving EKMS business from Massachusetts to the main office; and stock-based compensation expense not recorded in the statement of operations in previous years of $500,000.

Salaries and wages increased during the year ended December 31, 2005 compared to the year ended December 31, 2004 due to an increase in the
number of UTEK employees as well as $870,000 in salaries related to our newly acquired businesses.

We do not expect a significant increase
in salaries and wages for the year ended December 31, 2007.

Professional Fees



|                                   |  |      |       |   |      |   |     |      |  |   |                               |   |  |                               |      |  |    |     
|---------------------------------- |  | ---- | ----- | - | ---- | - | --- | ---- |  | - | ----------------------------- | - |  | ----------------------------- | ---- |  | -- | ----
|(in thousands, except percentages) |  | 2006 |       |   | 2005 |   |     | 2004 |  |   | PercentChange 2006versus 2005 |   |  | PercentChange 2005versus 2004 |     
|Professional fees                  |  | $    | 1,320 |   |      | $ | 774 |      |  | $ | 559                           |   |  | 70                            | %    |  | 38 | %   
|As a percent of revenue            |  |      | 2     | % |      |   | 3   | %    |  |   | 8                             | % |  | (1                            | )ppt |  | (5 | )ppt

Professional fees include accounting fees, legal fees and valuation expenses for our investments.
The increase in professional fees for the year ended December 31, 2006 compared to the year ended December 31, 2005 relates primarily to additional legal and accounting fees of approximately $300,000 and $80,000, respectively, related to
our recent registration statement filings, as well as $90,000 in additional valuation costs as a result of the increased number of our portfolio companies throughout the year.



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The increase in professional fees for the year ended December 31, 2005 compared to the year ended
December 31, 2004 relates to an increase in the cost of valuations due to an increase in the number of our portfolio companies, an increase in legal and accounting fees related to acquisitions and other projects, and other professional fees
related to our newly acquired businesses.

We do not expect a significant increase in professional fees for the year ended
December 31, 2007.

Sales and Marketing



|                                   |  |      |       |   |      |   |       |      |  |   |                               |   |  |                               |      |  |     |     
|---------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----------------------------- | - |  | ----------------------------- | ---- |  | --- | ----
|(in thousands, except percentages) |  | 2006 |       |   | 2005 |   |       | 2004 |  |   | PercentChange 2006versus 2005 |   |  | PercentChange 2005versus 2004 |     
|Sales and marketing                |  | $    | 2,877 |   |      | $ | 2,563 |      |  | $ | 1,138                         |   |  | 12                            | %    |  | 125 | %   
|As a percent of revenue            |  |      | 5     | % |      |   | 11    | %    |  |   | 16                            | % |  | (6                            | )ppt |  | (5  | )ppt

Sales and marketing expenses include advertising, marketing, sales salaries and wages,
commissions, travel and other selling expenses. Sales salaries and commissions increased $340,000 for the year ended December 31, 2006 compared to the year ended December 31, 2005, as a result of the increased number of technology
transfers and an increase in technology transfer values, as well as an increase in the size of the sales force. There were 29 technology transfers during the year ended December 31, 2006, as compared to fourteen for the year ended
December 31, 2005. Commissions paid to outside service providers used strictly to generate strategic alliance agreements increased $192,000 for the year ended December 31, 2006 due to an increase in the number of strategic alliances
brought in by these providers. These increases were offset by a decrease in outside consultant costs associated with a decrease UTEK-EKMS revenue.

The increase in sales and marketing expenses for the year ended December 31, 2005 compared to the year ended December 31, 2004 was due largely to higher commissions to outside service providers used strictly to generate strategic
alliance agreements, a significant increase in the number of our sales personnel to expand our business, and approximately $543,000 in fees paid to outside research consultants for fulfillment of certain contracts of one of our newly acquired
businesses.

It is our intention to continue to grow our sales force by increasing the number of sales personnel in locations around the
United States, Europe and Canada.

General and Administrative



|                                   |  |      |       |   |      |   |       |      |  |   |                               |   |  |                               |      |  |     |     
|---------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----------------------------- | - |  | ----------------------------- | ---- |  | --- | ----
|(in thousands, except percentages) |  | 2006 |       |   | 2005 |   |       | 2004 |  |   | PercentChange 2006versus 2005 |   |  | PercentChange 2005versus 2004 |     
|General and administrative         |  | $    | 4,117 |   |      | $ | 2,679 |      |  | $ | 1,730                         |   |  | 54                            | %    |  | 55  | %   
|As a percent of revenue            |  |      | 7     | % |      |   | 12    | %    |  |   | 24                            | % |  | (5                            | )ppt |  | (12 | )ppt

The increase in general and administrative costs for the year ended December 31, 2006
compared to the year ended December 31, 2005 is largely due to charitable contributions, outside services, printing and reproduction and rent expense. Charitable contributions include a gift of 5.1 million common shares of HydroFlo, Inc.
valued at $663,000. Outside services increased $90,000 during 2006 due primarily to the cost of royalties paid related to our Knowledge Express website acquired on July 1, 2005, as well as amounts paid to employment placement agencies. Printing
and reproduction increased approximately $155,000 during 2006 due to costs associated with our recent registration statement filings. Rent increased $155,000 during 2006 due to the buy-out of the lease at our Massachusetts location due in part to
the relocation of the EKMS division to the corporate headquarters in Tampa, Florida, as well as the new lease for the increased space at our corporate headquarters.

The increase in general and administrative costs for the year ended December 31, 2005 compared to the year ended December 31, 2004 is largely due to the cost of additional outside services related to the
listing of our



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shares of common stock on the London Stock Exchanges AIM market, royalties paid related to our Knowledge Express website acquired on July 1, 2005,
other general and administrative expenses related to our newly acquired businesses and an increase in costs related to the increase in the number of our employees.

We do not expect a significant increase in general and administrative expenses for the year ended December 31, 2007.

Goodwill Impairment

We decided during 2006 to make significant changes in strategy for UTEKip, Ltd.,
primarily switching the focus of operations in Israel from software to technology transfer, our core business. These changes were other-than-temporary; therefore management determined there was an impairment of the original purchase goodwill. We
recorded a total impairment of the goodwill for UTEKip (Israel segment) in 2006. Based on an analysis of the undiscounted cash flows, the Company determined that the goodwill for the reporting unit was impaired. This resulted in a write-down of
approximately $235,000, $147,000 after tax, which is an operating expense in the consolidated statements of operations for the year ended December 31, 2006.

Net Realized Gains or Losses on Investments



|                                   |  |      |     |      |    |       |      |  |                               |       |  |                               |   |  |      |   
|---------------------------------- |  | ---- | --- | ---- | -- | ----- | ---- |  | ----------------------------- | ----- |  | ----------------------------- | - |  | ---- | --
|(in thousands, except percentages) |  | 2006 |     | 2005 |    |       | 2004 |  | PercentChange 2006versus 2005 |       |  | PercentChange 2005versus 2004 |  
|Realized gains/ (losses)           |  | $    | 903 |      | ($ | 3,459 | )    |  | $                             | 1,556 |  | 126                           | % |  | (322 | %)

Net realized gains (losses) on investments, net of income tax effect, amounted to $903,181 for the
year ended December 31, 2006 and were related to sales as follows:



|                                                       |  |                  |  |                      |           |  
|------------------------------------------------------ |  | ---------------- |  | -------------------- | --------- | -
|Company Name                                           |  | Number of Shares |  | Realized Gain (Loss) |          
|Sequiam Corporation                                    |  | 645,000          |  | $                    | 3,015     |  
|INYX, Inc.                                             |  | 29,999           |  |                      | 29,733    |  
|Swiss Medica, Inc.                                     |  | 465,000          |  |                      | (12,790   | )
|Z Trim Holdings (formerly Circle Group Holdings, Inc.) |  | 973,508          |  |                      | 395,270   |  
|Israel Technology Acquisition Corporation              |  | 50,000           |  |                      | 6,732     |  
|Israel Technology Acquisition Corp. -warrants          |  | 100,000          |  |                      | 2,739     |  
|Fortress America Acquisition Corporation               |  | 40,000           |  |                      | 18,971    |  
|Xethanol Corporation                                   |  | 1,215,475        |  |                      | 1,889,832 |  
|eFoodSafety.com, Inc.                                  |  | 61,224           |  |                      | (3,380    | )
|HydroFlo, Inc. (1)                                     |  | 5,535,044        |  |                      | (40,721   | )
|Genethera, Inc.                                        |  | 14,796           |  |                      | (21,583   | )
|Magic Media Networks, Inc.                             |  | 97,904           |  |                      | 225       |  
|E Med Future, Inc.                                     |  | 675,032          |  |                      | (218,444  | )
|GS CleanTech Corporation                               |  | 295,500          |  |                      | (36,180   | )
|Harborlight Diversified Fund, LP                       |  | 250,000          |  |                      | 17,116    |  
|Health Sciences Group, Inc.                            |  | 100,000          |  |                      | (47,511   | )
|Manakoa Services Company                               |  | 58,574           |  |                      | (11,759   | )
|NutraCea International Corporation                     |  | 359,182          |  |                      | 277,325   |  
|Pacific Biometrics, Inc.                               |  | 91,885           |  |                      | 16,539    |  
|Power3 Medical Products, Inc.                          |  | 80,000           |  |                      | (13,537   | )
|SheerVision Inc.                                       |  | 129,835          |  |                      | (330,063  | )
|US Energy Initiatives                                  |  | 166,000          |  |                      | (9,240    | )
|American Soil Technologies, Inc.                       |  | 25,300           |  |                      | 104       |  
|Vitacube Systems Holding, Inc.                         |  | 54,857           |  |                      | (40,503   | )
|Intra-Asia Entertainment Corporation                   |  | 720,639          |  |                      | (968,709  | )
|                                                       |  |                  |  |                      |           |  
|Total                                                  |  |                  |  | $                    | 903,181   |  
|                                                       |  |                  |  |                      |           |  



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Net realized gains (losses) on investments, net of income tax effect, amounted to ($3,458,979) for the
year ended December 31, 2005 and were related to sales as follows:



|                                                       |  |                  |  |                      |             |  
|------------------------------------------------------ |  | ---------------- |  | -------------------- | ----------- | -
|Company Name                                           |  | Number of Shares |  | Realized Gain (Loss) |            
|Z Trim Holdings (formerly Circle Group Holdings, Inc.) |  | 2,642,197        |  | $                    | 1,340,949   |  
|E Med Future, Inc.                                     |  | 608,968          |  |                      | (161,387    | )
|Telkonet, Inc.                                         |  | 20,668           |  |                      | 37,317      |  
|Magic Media Networks, Inc.                             |  | 477,096          |  |                      | (41,021     | )
|eFoodSafety.com, Inc.                                  |  | 61,224           |  |                      | (2,355      | )
|Full Circle Registry, Inc.                             |  | 200,000          |  |                      | (99,784     | )
|HydroFlo, Inc.                                         |  | 364,956          |  |                      | 88,510      |  
|Silver Screen Studios, Inc.                            |  | 47,615           |  |                      | (29,137     | )
|Peak Entertainment, Inc.                               |  | 4,000            |  |                      | (7,056      | )
|Swiss Medica, Inc.                                     |  | 200,000          |  |                      | 8,683       |  
|Jenex Corporation                                      |  | 133,333          |  |                      | (8,099      | )
|Group of zero value shares (2)                         |  | Various          |  |                      | (4,585,599  | )
|                                                       |  |                  |  |                      |             |  
|Total                                                  |  |                  |  |                      | ($3,458,979 | )
|                                                       |  |                  |  |                      |             |  

Net realized gains (losses) on investments, net of income tax effect, amounted to $1,555,576
million for the year ended December 31, 2004, and were related to sales of:



|                                                       |  |                  |  |                      |           |  
|------------------------------------------------------ |  | ---------------- |  | -------------------- | --------- | -
|Company Name                                           |  | Number of Shares |  | Realized Gain (Loss) |          
|Full Circle Registry, Inc.                             |  | 188,500          |  |                      | ($85,395  | )
|Z Trim Holdings (formerly Circle Group Holdings, Inc.) |  | 684,932          |  |                      | 1,618,707 |  
|Duraswitch Industries, Inc.                            |  | 34,782           |  |                      | 33,226    |  
|Innovative Medical Services, Inc.                      |  | 35,560           |  |                      | (10,962   | )
|                                                       |  |                  |  |                      |           |  
|Total                                                  |  |                  |  | $                    | 1,555,576 |  
|                                                       |  |                  |  |                      |           |  

---

|(1) | We elected to abandon our right, title and interest in and to 400,000 shares common stock of HydroFlo, Inc. See note 2 to our consolidated financial statements elsewhere in this
annual report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Upon approval from our Board of Directors, our management made the decision to sell these investments because such investments had been carried on our financial statements with a
zero value for several quarters. Maintaining these investments was costly due to expenses we incurred in connection with our independent valuation service providers quarterly valuation of such investments and, in the opinion of management, the
likelihood of the future appreciation in value of such investments was minimal. The following investments were included in the group of zero value shares above: Provision Operation Systems, Inc., Advanced Recycling Sciences, Inc., Graphco Holdings
Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corporation, Silver Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks
Corporation, and Xeminex, Ltd. For more information about each of these investments, see the schedule of investments included in our consolidated financial statements contained elsewhere in this annual report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Net Changes in Unrealized Appreciation or Depreciation on Investments

We determine the value of each investment in our portfolio on a quarterly basis, and changes in value result in unrealized appreciation or depreciation
being recognized. At December 31, 2006, approximately 74% of our



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net 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. Although many of the securities we hold in our portfolio are quoted
on the OTC Bulletin Board or listed on the American Stock Exchange, our Board of Directors is required to determine the fair value of such securities if the validity of the market quotations appears to be questionable, or if the number of quotations
is such as to indicate that there is a thin market in the security. The fair value of these securities is frequently less than the market quotations for such securities. Because there is typically no readily available market value for the
investments in our portfolio, 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 valuation service providers. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments determined in good faith by the Board of
Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.



|                                       |  |      |        |   |      |    |     |      |  |    |                               |   |  |                               |   |  |    |  
|-------------------------------------- |  | ---- | ------ | - | ---- | -- | --- | ---- |  | -- | ----------------------------- | - |  | ----------------------------- | - |  | -- | -
|(in thousands, except percentages)     |  | 2006 |        |   | 2005 |    |     | 2004 |  |    | PercentChange 2006versus 2005 |   |  | PercentChange 2005versus 2004 |  
|Unrealized appreciation/(depreciation) |  | ($   | 25,758 | ) |      | ($ | 333 | )    |  | ($ | 238                           | ) |  | 7631                          | % |  | 40 | %

Net unrealized depreciation on investments, net of income tax effect, amounted to ($25,758,186)
for the year ended December 31, 2006 and were related to our investments as follows:



|                                       |  |                                           |             |  
|-------------------------------------- |  | ----------------------------------------- | ----------- | -
|Company Name                           |  | Net UnrealizedAppreciation (Depreciation) |            
|Health Sciences Group, Inc.            |  | $                                         | (434,227    | )
|Xethanol Corporation                   |  |                                           | (425,918    | )
|Material Technologies, Inc.            |  |                                           | (545,424    | )
|Industrial Biotechnology Corporation   |  |                                           | (4,914,275  | )
|KP Renewables, plc                     |  |                                           | (3,830,809  | )
|Advanced Refractive Technologies, Inc. |  |                                           | (1,015,456  | )
|Fuel FX International                  |  |                                           | (784,954    | )
|Trio Industries Group, Inc.            |  |                                           | (8,306,858  | )
|UBA Technology, Inc.                   |  |                                           | (1,619,168  | )
|CytoDyn, Inc.                          |  |                                           | (1,736,363  | )
|Avalon Oil and Gas, Inc.               |  |                                           | (700,252    | )
|Liberty Diversified Holdings, Inc.     |  |                                           | (659,661    | )
|All other investments                  |  |                                           | (784,821    | )
|                                       |  |                                           |             |  
|                                       |  | $                                         | (25,758,186 | )
|                                       |  |                                           |             |  

The net unrealized depreciation for the year ended December 31, 2006 was mostly due to the
significant write down of five of our over 60 investments in our portfolio: Industrial Biotechnology Corp., Trio Industries Group, Inc., KP Renewables, plc., UBA Technology, Inc., and Cytodyn, Inc. Therefore, our Board of Directors determined a
write down of the entire investment, totaling $8.3 million net of deferred tax benefit, was appropriate. In September 2006, KP Renewables plc issued a press release that stated the company had been suspended from trading on the London Stock Exchange
and that additional financing was required. Since that time, that company has not issued any additional financial or other information. Our Board of Directors determined that a total write down of the shares, totaling $3.8 million net of deferred
tax benefit, was appropriate. Industrial Biotechnology Corp., UBA Technology, Inc., and Cytodyn, Inc., investments lost more than half their market price value during the year ended December 31, 2006. The write down for the year for these three
investments totaled $8.3 million.



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In the fourth quarter, we experienced losses in our portfolio, primarily from the reduction in value of
five equity positions. While these losses were significant, failures among small cap companies is not unexpected and may occur in the future. The current portfolio is comprised of more than 60 holdings. Many of these positions are with small
capitalization companies which over time may have high failure rates due to a variety of factors. For clients that fail, UTEK may lose the entire amount of its capital spent acquiring and transferring the technology to them.

Net unrealized depreciation on investments, net of income tax effect, amounted to ($333,176) for the year ended December 31, 2005 and were related
to our investments as follows:



|                                                       |  |                                           |            |  
|------------------------------------------------------ |  | ----------------------------------------- | ---------- | -
|Company Name                                           |  | Net UnrealizedAppreciation (Depreciation) |           
|UTEK Real Estate Holdings                              |  | $                                         | (148,551   | )
|Z Trim Holdings (formerly Circle Group Holdings, Inc.) |  |                                           | (3,369,849 | )
|Health Sciences Group, Inc.                            |  |                                           | (513,009   | )
|Swiss Medica, Inc.                                     |  |                                           | (156,262   | )
|Hydroflo, Inc.                                         |  |                                           | (212,458   | )
|Manakoa Services Company                               |  |                                           | (1,291,108 | )
|Industrial Biotechnology Corporation                   |  |                                           | 2,197,377  |  
|KP Renewables, plc                                     |  |                                           | (168,869   | )
|GS Energy Corp (formerly Inseq Corporation)            |  |                                           | (1,065,035 | )
|Trio Industries Group, Inc.                            |  |                                           | 616,387    |  
|Group of zero value shares (1)                         |  |                                           | 4,100,000  |  
|All other investments                                  |  |                                           | (321,799   | )
|                                                       |  |                                           |            |  
|                                                       |  | $                                         | (333,176   | )
|                                                       |  |                                           |            |  

---

|(1) | Upon approval from our Board of Directors, our management made the decision to sell these investments because such investments had been carried on our financial statements with a
zero value for several quarters. Maintaining these investments was costly due to expenses we incurred in connection with our independent valuation service providers quarterly valuation of such investments and, in the opinion of management, the
likelihood of the future appreciation in value of such investments was minimal. The following investments were included in the group of zero value shares above: Provision Operation Systems, Inc., Advanced Recycling Sciences, Inc., Graphco Holdings
Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corporation, Silver Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks
Corporation, and Xeminex, Ltd. For more information about each of these investments, see the schedule of investments included in our consolidated financial statements contained elsewhere in this annual report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The net unrealized depreciation for the year ended December 31, 2005 was mostly due to the significant write down of three investments in our
portfolio, offset by the unrealized gain that resulted from the recognition of losses on several zero value investments (see (1) above). Because we had previously recorded the depreciated value of these investments as unrealized depreciation,
we had to make an accounting entry to reverse the unrealized depreciation. This accounting entry resulted in an unrealized appreciation of $4.6 million relating to these investments. The three investments with significant unrealized losses were Z
Trim Holdings (formerly Circle Group Holdings, Inc.), Manakoa Services Company, and GS Energy Corp. (formerly Inseq Corporation).



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Net change in unrealized depreciation on investments, net of income tax effect, amounted to ($238,214)
for the year ended December 31, 2004 and were related to our investments as follows:



|                                                      |  |                                           |          |  
|----------------------------------------------------- |  | ----------------------------------------- | -------- | -
|Company Name                                          |  | Net UnrealizedAppreciation (Depreciation) |         
|Z Trim Holdings (formerly Circle Group Holdings, Inc, |  | $                                         | 493,235  |  
|Intra-Asia Entertainment Corporation                  |  |                                           | (351,868 | )
|E Med Future, Inc.                                    |  |                                           | (135,716 | )
|Zkid Network Company                                  |  |                                           | (423,488 | )
|Manakoa Services Company                              |  |                                           | 197,077  |  
|All other investments                                 |  |                                           | (17,454  | )
|                                                      |  |                                           |          |  
|                                                      |  | $                                         | (238,214 | )
|                                                      |  |                                           |          |  

The net unrealized depreciation for the year ended December 31, 2004 was mostly due to the
write down of two investments in our portfolio. The two investments with significant unrealized losses were Intra-Asia Entertainment Corporation and Zkid Network Company, and GS Energy Corp. (formerly Inseq Corporation). They each lost a significant
portion of their market price value during the year ended December 31, 2005.

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

Liquidity and Capital Resources

At December 31, 2006, we had cash and cash equivalents of $9.7 million. We also had investments in U.S. Treasuries and certificates of deposit (CDs)
of $4.6 million. We typically invest our excess cash in U.S. Treasuries and CDs, which normally have three month to one year maturities. These investments do not qualify as cash equivalents.

We have financed substantially all of our operations since inception through the issuance of equity securities and, to a lesser extent, sales of
investments, cash received in connection with the provision of strategic alliance and other consulting services and the use of funds from our investments in U.S. Treasuries and certificates of deposit. Our primary source of liquidity and capital for
the year ended December 31, 2006 was $9.7 million in proceeds generated from the sale of shares of our portfolio companies and the completion of a registered offering of shares of our common stock, which generated $9.0 million net of offering
costs.

Our income from operations consists primarily of the sale of technology rights and consulting income from strategic alliances in
exchange for equity securities rather than cash. In the year ended December 31, 2006, 94% of our income from operations was paid in the form of equity securities. Of the $57.0 million in income from operations in 2006, $3.2 million was received
in the form of cash. During the year ended December 31, 2006, we used approximately $13.0 million to fund our technology transfer transactions and approximately $11.0 million for operating expenses. During 2007, we expect our cash outflow for
technology transfer transactions will be scaled to available cash and that the cost of our operations should be similar to those incurred in 2006.

During the year ended December 31, 2006, we loaned Ybor City Group, Inc., a wholly owned
subsidiary of UTEK Real Estate Holdings, Inc., one of our portfolio companies, $1.1 million for real estate improvements to the office buildings located in Tampa, Florida. We expect the renovations to be completed by the spring of 2007 and the
additional cash outlay to be less than $350,000. We also invested $1.0 million in cash and issued 82,919 shares of our common stock with a market value of $1.0 million for the acquisition of 22ndStreet of Ybor City, Inc., which is also a wholly owned subsidiary of UTEK Real Estate Holdings, Inc.

Our Board of Directors declared two cash dividends of $0.02 per share during fiscal year 2006, for a total of approximately $357,000. On March 30,
2006, our Board of Directors approved a special dividend of $0.02 per



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share that was paid on May 19, 2006 to shareholders of record on April 28, 2006. On December 1, 2006, our Board of Directors approved a
special dividend of $0.02 per share that was paid on January 31, 2007 to shareholders of record on January 12, 2007. Our Board of Directors will have sole discretion in determining whether to declare and pay cash dividends in the future.
The declaration of cash dividends will depend on our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board of Directors. Our ability to pay cash dividends in the future could be
limited or prohibited by regulatory requirements and the terms of financing agreements that we may enter into or by the terms of any preferred stock that we may authorize and issue.

In February 2007, we obtained a $4,000,000 uncommitted bank line of credit with the Bank of Tampa. The advances on the line of credit accrue interest
(payable monthly) at prime (presently 8.25%). The principal and any unpaid interest are at due upon demand. This line is collateralized with commercial real estate owned by UTEK Real Estate Holdings, Inc. As of December 31, 2006, we had no
outstanding debt.

We currently intend to fund capital our expenditures, as well as liquidity needs, with existing cash and cash equivalent
balances, our investments in U.S. treasuries and certificates of deposit and borrowings, as well as with cash generated by operations, (including the sales of our investments). We believe that these sources will be sufficient to meet working capital
needs, capital requirements, and current commitments for at least the next twelve months. However, our capital requirements will depend on many factors, the most important factor is our sales of technology rights. We will scale the number of sales
of technology rights to available cash resources. We may seek to raise additional funds through public or private debt or equity financing. Additional funds may not be available on favorable terms to us, if at all.

In February 2007, UTEK entered into an equity monetization agreement with C.E. Unterberg, Towbin, LLC. (CEUT). Under this agreement and at
UTEKs request, CEUT will monetize a portion of select, restricted equity stakes that UTEK acquires through its technology transfer services. In consideration for providing these services, CEUT will receive a commission according to a sliding
scale, payment of which will be deducted from the proceeds of each sale following settlement.

Contractual Obligations

The following table reflects a summary of our contractual obligations and other commercial commitments as of December 31, 2006:



|                            |  |                              |         |                               |   |         |  |      |         |      |   |       |  |   |     |  |   |    
|--------------------------- |  | ---------------------------- | ------- | ----------------------------- | - | ------- |  | ---- | ------- | ---- | - | ----- |  | - | --- |  | - | ---
|                            |  | Payments due by December 31, |         | Payments duemore than 5 Years
|                            |  | 2007                         |         | 2008                          |   | 2009    |  | 2010 |         | 2011 |  
|Operating Lease Obligations |  | $                            | 267,578 |                               | $ | 260,402 |  | $    | 141,713 |      | $ | 1,301 |  | $ | -0- |  | $ | -0-
|                            |  |                              |         |                               |   |         |  |      |         |      |   |       |  |   |     |  |   |    

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts
reported in the financial statements. Critical accounting estimates are those that are both important to the presentation of our financial condition and results of operations and require managements most difficult, complex, or subjective
judgments. Our critical accounting estimates are those applicable to the valuation of investments, certain revenue recognition matters and determination of stock-based compensation as discussed below.

Valuation Methodology

We primarily receive illiquid
securities in connection with our strategic alliance agreements and technology transfer transactions. These securities are generally subject to restrictions on resale and generally have no



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established trading market. We value substantially all of our investments at fair value as determined in good faith by the Board of Directors in accordance
with our valuation policy on a quarterly basis. We continue to utilize independent valuation service providers to assist the Board of Directors in determining the fair value of our portfolio.

We determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a reasonable period of time between
willing parties other than in a forced or liquidation sale. Our valuation process is intended to provide a consistent basis for determining the fair value of our portfolio investments. We will record unrealized depreciation on investments when we
believe that an investment has become impaired, including where realization of an equity security is doubtful. We will record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and, therefore, our
equity security has also appreciated in value. Upon the sale of our investments, the values that are ultimately realized may be different from the presently determined fair values of such securities. This difference could be material.

Our equity interests in portfolio companies for which there is no liquid public market are valued using industry valuation benchmarks, and then the value
is assigned a discount reflecting the illiquid nature of the investment as well as our minority, non-control position. When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, the pricing indicated by
the external event is used to corroborate our valuation. The determined values are generally discounted to account for restrictions on resale and minority ownership positions. The value of our equity interests in public companies for which market
quotations are readily available is based on the public market price on the balance sheet date. Securities that carry certain restrictions on resale are typically valued at a discount from the public market value of the security.

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

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the original cost basis of the investment
without regard to unrealized appreciation or depreciation previously recognized. The original cost basis of the securities we receive in connection with our strategic alliance agreements and technology transfers is equal to the amount of revenue we
recognized upon the receipt of such securities.

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

Stock-Based Compensation

Effective January 1, 2006, we adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123 (R), Share-Based Payment. Prior to the adoption of SFAS 123(R) we accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25,
Accounting for Stock Issued to Employees, and accordingly, recognized no compensation expense for stock option grants.

As a
result of adopting SFAS 123(R), our income from operations before taxes, net increase in net assets, basic earnings per share and diluted earnings per share were approximately $505,000, $476,000, $0.06 and $0.06 lower, respectively, for the year
ended December 31, 2006 than if we had continued to account for stock-based compensation under APB Opinion No. 25 for our stock option grants.

The impact on our income from operations before taxes, net increase in net assets, basic earnings per share and diluted earnings per share had we accounted for stock-based compensation in accordance with SFAS 123(R)
in 2005 would have been $329,000, $310,000, $0.04 and $0.05 lower, respectively, for the year ended December 31, 2005 and $261,000, $246,000, $0.04 and $0.04 lower, respectively, for the year ended December 31, 2004. Prior periods were not
restated to reflect the impact of adopting the new standard and there is no cumulative effect.



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We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the
date of grant, using assumptions for volatility, expected term, risk-free interest rate and dividend yield. We have used one grouping for the assumptions as our option grants are primarily basic with similar characteristics. The expected term of
options granted has been derived based upon our history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data was also used to estimate option exercises and employee
terminations. Estimated volatility is based upon our historical market price at consistent points in a period equal to the expected life of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of
grant and the dividend yield is based on the historical dividend yield.

Recently Issued Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes, which clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and
transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect the adoption of FIN 48 to materially impact our financial position or results of operations.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157 (SFAS 157),
Fair Value Measurements. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of SFAS 157 to materially impact our financial position or results of operations.

Recent Developments

In February 2007, we obtained a
$4,000,000 uncommitted bank line of credit with the Bank of Tampa. The advances on the line of credit accrue interest (payable monthly) at prime (presently 8.25%). The principal and any unpaid interest are due upon demand. This line is
collateralized with commercial real estate owned by UTEK Real Estate Holdings, Inc. As of December 31, 2006, we had no outstanding debt.

In February 2007, UTEK entered into an equity monetization agreement with C.E. Unterberg, Towbin, LLC. (CEUT). Under this agreement and at UTEKs request, CEUT will monetize a portion of select, restricted equity stakes
that UTEK acquires through its technology transfer services. In consideration for providing these services, CEUT will receive a commission according to a sliding scale, payment of which will be deducted from the proceeds of each sale following
settlement.

In February 2007, UTEK entered into an equity monetization agreement with vFinance Investments, Inc. (VFIN). Under
this agreement and at UTEKs request, VFIN will monetize a portion of select, restricted equity stakes that UTEK acquires through its technology transfer services. In consideration for providing these services, VFIN will receive a commission
according to a sliding scale, payment of which will be deducted from the proceeds of each sale following settlement.

The Board of
Directors has authorized the Company to repurchase from time to time in the open market up to $4 million of shares of its common stock during the next twelve months. The Board of Directors directed the Companys management to repurchase
shares of the Companys common stock at such times and in such



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amounts as management determines to be appropriate. The Company will use its cash on hand to fund any repurchases and is not obligated to acquire any
particular amount of common stock pursuant to the repurchase program, which may be suspended at any time.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk
of loss arising from adverse changes in market rates and prices. We are primarily exposed to equity price risk and foreign exchange risk. The following is a discussion of our equity market risk and foreign exchange risk.

Equity price risk arises from exposure to securities that represent an ownership interest in our portfolio companies. The value of our equity securities
and our other investments are based on quoted market prices or our Board of Directors good faith determination of their fair value (which is based, in part, on quoted market prices). Market prices of common equity securities, in general, are
subject to fluctuations, which could cause the amount to be realized upon sale or exercise of the instruments to differ significantly from the current reported value. The fluctuations may result from perceived changes in the underlying economic
characteristics of our portfolio companies, the relative price of alternative investments, general market conditions and supply and demand imbalances for a particular security.

We are also subject to risk from changes in foreign exchange rates with respect to our subsidiaries that use a foreign currency as their functional
currency. Such changes could result in cumulative translation gains or losses that are included in our net assets. Revenue from foreign subsidiaries as a percentage of total revenue was 2% for the year ended December 31, 2006. Our foreign
subsidiaries are based in the United Kingdom and Israel. Exchange rate fluctuations between the U.S. dollar and the currencies of these countries result in positive or negative fluctuations in the amounts relating to foreign operations reported in
our consolidated financial statements. We generally do not use foreign currency options and forward contracts to hedge against the earnings effect of such fluctuations. While we do not expect to incur material losses as a result of this currency
risk, there can be no assurance that losses will not result.



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Item 8.Financial Statements and Supplementary Data

UTEK CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES



|                                                                                                      |  |     
|----------------------------------------------------------------------------------------------------- |  | ----
|Documents                                                                                             |  | Page
|Report of Independent Registered Public Accounting Firm                                               |  | 37  
|                                                                                                      | 
|Report of Management on Internal Control over Financial Reporting                                     |  | 38  
|                                                                                                      | 
|Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting  |  | 39  
|                                                                                                      | 
|Consolidated Statements of Assets and Liabilities at December 31, 2006 and 2005                       |  | 40  
|                                                                                                      | 
|Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004            |  | 41  
|                                                                                                      | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004            |  | 42  
|                                                                                                      | 
|Consolidated Statements of Changes in Net Assets for the years ended December 31, 2006, 2005 and 2004 |  | 44  
|                                                                                                      | 
|Consolidated Schedules of Investments at December 31, 2006 and 2005                                   |  | 45  
|                                                                                                      | 
|Notes to Consolidated Financial Statements                                                            |  | 55  



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

UTEK Corporation and Subsidiaries

Tampa, Florida

We have audited the accompanying consolidated statements of assets and liabilities of UTEK Corporation and subsidiaries (the Company)
including the schedule of investments as of December 31, 2006 and 2005 and the related consolidated statements of operations, cash flows and changes in net assets for the three years ended December 31, 2006. These consolidated financial
statements and consolidated schedule of investments are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements and schedule of investments based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and schedule of
investments referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005 and the results of its operations, cash flows and changes in net assets for the three years ended
December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

We have also audited,
in accordance with the standards of the Public Company Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting as of December 31, 2006, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2007 expressed an unqualified opinion thereon.



/s/ PENDER NEWKIRK & COMPANYPender Newkirk & Company LLPCertified Public Accountants


Tampa, Florida

February 28, 2007



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REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

UTEK Corporation

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in
Rules 13a-15(f) under the Securities Exchange Act of 1934 (Exchange Act). The Companys internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the Consolidated Financial Statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable
assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Companys
internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), in Internal
ControlIntegrated Framework. Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2006.

Our managements assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by
Pender Newkirk & Company LLP, an independent registered public accounting firm, as stated in their report which is included herein.



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Report of Independent Registered Public Accounting Firm

Board of Directors

UTEK Corporation and Subsidiaries

Tampa, Florida

We have audited managements assessment, included in the accompanying Report of Management on Internal Control Over Financial Reporting, that UTEK
Corporation and subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal ControlIntegrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.

In our opinion, managements assessment that the Company maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statements of assets and liabilities of the Company, including the schedule of investments, as of December 31, 2006 and 2005, and the related statements of operations, cash flows and
changes in net assets for each of the three years in the period ended December 31, 2006 and our report dated February 28, 2007 expressed an unqualified opinion thereon.

Pender Newkirk & Company LLP

Certified Public Accountants

Tampa, Florida

February 28, 2006



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UTEK Corporation

Consolidated Statements of Assets and Liabilities



|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                              |  | December 31, 2006 |             |   | December 31, 2005 |  
|ASSETS                                                                                                                                                        |  |                   |             |   |                   |   |            |  
|Investments:                                                                                                                                                  |  |                   |             |   |                   |   |            |  
|Non-affiliate investments (cost: 2006 - $41,786,374; 2005 - $14,652,995)                                                                                      |  | $                 | 14,578,700  |   |                   | $ | 15,498,623 |  
|Affiliate investments (cost: 2006 - 22,354,448; 2005 - $15,486,769)                                                                                           |  |                   | 8,713,900   |   |                   |   | 9,764,550  |  
|Controlled investments (cost: 2006 - $15,485,318; 2005 - $2,126,573)                                                                                          |  |                   | 10,001,772  |   |                   |   | 1,888,396  |  
|U.S. Treasuries and certificates of deposit (cost: 2006 - $4,584,651; 2005 - $11,601,357)                                                                     |  |                   | 4,584,651   |   |                   |   | 11,601,357 |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|Total investments                                                                                                                                             |  |                   | 37,879,023  |   |                   |   | 38,752,926 |  
|Cash and cash equivalents                                                                                                                                     |  |                   | 9,685,111   |   |                   |   | 5,275,626  |  
|Accounts receivable, net of allowance for bad debt                                                                                                            |  |                   | 534,605     |   |                   |   | 746,207    |  
|Prepaid expenses and other assets                                                                                                                             |  |                   | 375,007     |   |                   |   | 448,810    |  
|Fixed assets, net                                                                                                                                             |  |                   | 595,001     |   |                   |   | 311,103    |  
|Goodwill                                                                                                                                                      |  |                   | 3,021,163   |   |                   |   | 3,128,139  |  
|Intangible assets                                                                                                                                             |  |                   | 190,100     |   |                   |   | 343,149    |  
|Deferred tax asset                                                                                                                                            |  |                   | 760,800     |   |                   |   |           |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|TOTAL ASSETS                                                                                                                                                  |  |                   | 53,040,810  |   |                   |   | 49,005,960 |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|LIABILITIES                                                                                                                                                   |  |                   |             |   |                   |   |            |  
|Accrued expenses                                                                                                                                              |  |                   | 595,764     |   |                   |   | 367,763    |  
|Deferred revenue                                                                                                                                              |  |                   | 1,463,884   |   |                   |   | 1,606,242  |  
|Deferred tax liability                                                                                                                                        |  |                   |            |   |                   |   | 2,590,837  |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|TOTAL LIABILITIES                                                                                                                                             |  |                   | 2,059,648   |   |                   |   | 4,564,842  |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|NET ASSETS                                                                                                                                                    |  | $                 | 50,981,162  |   |                   | $ | 44,441,118 |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|Commitments and Contingencies                                                                                                                                 |  |                   |             |   |                   |   |            |  
|Composition of net assets:                                                                                                                                    |  |                   |             |   |                   |   |            |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued and outstanding                                                                     |  |                   |            |   |                   |   |           |  
|Common stock, $.01 par value, 19,000,000 shares authorized; 8,936,009 and 7,961,505 shares issued and outstanding at December 31, 2006
and 2005, respectively |  | $                 | 89,361      |   |                   | $ | 79,616     |  
|Additional paid-in capital                                                                                                                                    |  |                   | 51,993,822  |   |                   |   | 40,347,663 |  
|Accumulated income:                                                                                                                                           |  |                   |             |   |                   |   |            |  
|Accumulated net operating income                                                                                                                              |  |                   | 29,721,366  |   |                   |   | 10,134,057 |  
|Net realized loss on investments, net of income taxes                                                                                                         |  |                   | (2,065,218  | ) |                   |   | (2,968,399 | )
|Net unrealized depreciation of investments, net of deferred income taxes                                                                                      |  |                   | (28,897,125 | ) |                   |   | (3,138,939 | )
|Foreign currency translation adjustment                                                                                                                       |  |                   | 138,956     |   |                   |   | (12,880    | )
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|Net assets                                                                                                                                                    |  | $                 | 50,981,162  |   |                   | $ | 44,441,118 |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  
|Net asset value per share                                                                                                                                     |  | $                 | 5.71        |   |                   | $ | 5.58       |  
|                                                                                                                                                              |  |                   |             |   |                   |   |            |  

See accompanying notes



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UTEK Corporation

Consolidated Statements of Operations



|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                                                                                                                                                    |  | Year ended December 31 |            
|                                                                                                                                                                    |  | 2006                   |             |   | 2005 |   |            | 2004 | 
|Income from operations:                                                                                                                                             |  |                        |             |   |      |   |            |      |  |   |           |  
|Sale of technology rights                                                                                                                                           |  | $                      | 51,190,576  |   |      | $ | 18,131,941 |      |  | $ | 5,130,614 |  
|Consulting and other services                                                                                                                                       |  |                        | 4,950,036   |   |      |   | 4,178,504  |      |  |   | 1,980,944 |  
|Investment income, net                                                                                                                                              |  |                        | 812,325     |   |      |   | 433,378    |      |  |   | 77,057    |  
|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|                                                                                                                                                                    |  |                        | 56,952,937  |   |      |   | 22,743,823 |      |  |   | 7,188,615 |  
|Expenses:                                                                                                                                                           |  |                        |             |   |      |   |            |      |  |   |           |  
|Acquisition of technology rights                                                                                                                                    |  |                        | 12,945,145  |   |      |   | 4,599,570  |      |  |   | 1,151,152 |  
|Salaries and wages                                                                                                                                                  |  |                        | 3,430,327   |   |      |   | 2,675,317  |      |  |   | 1,080,196 |  
|Professional fees                                                                                                                                                   |  |                        | 1,320,108   |   |      |   | 774,434    |      |  |   | 559,435   |  
|Sales and marketing                                                                                                                                                 |  |                        | 2,876,682   |   |      |   | 2,563,430  |      |  |   | 1,137,902 |  
|General and administrative                                                                                                                                          |  |                        | 4,116,591   |   |      |   | 2,679,015  |      |  |   | 1,730,408 |  
|Goodwill impairment                                                                                                                                                 |  |                        | 234,940     |   |      |   |           |      |  |   |          |  
|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|                                                                                                                                                                    |  |                        | 24,923,793  |   |      |   | 13,291,766 |      |  |   | 5,659,093 |  
|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|Income before income taxes                                                                                                                                          |  |                        | 32,029,144  |   |      |   | 9,452,057  |      |  |   | 1,529,522 |  
|Provision for income taxes                                                                                                                                          |  |                        | 12,084,937  |   |      |   | 3,564,227  |      |  |   | 586,800   |  
|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|Net income from operations                                                                                                                                          |  |                        | 19,944,207  |   |      |   | 5,887,830  |      |  |   | 942,722   |  
|                                                                                                                                                                    |  |                        |            
|Net realized and unrealized gains (losses):                                                                                                                         |  |                        |             |   |      |   |            |      |  |   |           |  
|Net realized gains (losses) on investments, net of income tax expense (benefit) of $545,163, ($2,086,923) and $938,534 for 2006, 2005 and
2004, respectively        |  |                        | 903,181     |   |      |   | (3,458,979 | )    |  |   | 1,555,576 |  
|Net change in unrealized depreciation of investments, net of deferred tax benefit of ($15,540,139), ($201,008) and ($143,723) for 2006, 2005
and 2004, respectively |  |                        | (25,758,186 | ) |      |   | (333,176   | )    |  |   | (238,214  | )
|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|Net increase (decrease) in net assets from operations                                                                                                               |  | $                      | (4,910,798  | ) |      | $ | 2,095,675  |      |  | $ | 2,260,084 |  
|                                                                                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|Net increase (decrease) in net assets from operations per share:                                                                                                    |  |                        |             |   |      |   |            |      |  |   |           |  
|Basic                                                                                                                                                               |  |                        | ($0.56      | ) |      |   | $0.29      |      |  |   | $0.41     |  
|Diluted                                                                                                                                                             |  |                        | ($0.56      | ) |      |   | $0.29      |      |  |   | $0.37     |  
|Weighted average shares:                                                                                                                                            |  |                        |             |   |      |   |            |      |  |   |           |  
|Basic                                                                                                                                                               |  |                        | 8,786,605   |   |      |   | 7,194,212  |      |  |   | 5,487,629 |  
|Diluted                                                                                                                                                             |  |                        | 8,786,605   |   |      |   | 7,325,312  |      |  |   | 6,098,537 |  
|Dividend declared or paid per share:                                                                                                                                |  | $                      | 0.04        |   |      |   |           |      |  |   |          |  

See accompanying notes



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UTEK Corporation

Consolidated Statements of Cash Flows



|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ---------- | -
|                                                                                                                         |  | Year Ended December 31 |            
|                                                                                                                         |  | 2006                   |             |   | 2005 |   |             | 2004 | 
|Operating Activities:                                                                                                    |  |                        |             |   |      |   |             |      |  |   |            |  
|Net increase (decrease) in net assets from operations                                                                    |  |                        | ($4,910,798 | ) |      | $ | 2,095,675   |      |  | $ | 2,260,084  |  
|Adjustments to reconcile net increase (decrease) in net assets from operations to net cash used in operating activities: |  |                        |             |   |      |   |             |      |  |   |            |  
|Change in net unrealized depreciation of investments                                                                     |  |                        | 41,298,325  |   |      |   | 532,762     |      |  |   | 381,935    |  
|Depreciation and amortization                                                                                            |  |                        | 211,933     |   |      |   | 144,434     |      |  |   | 53,228     |  
|Goodwill and intangible asset impairment                                                                                 |  |                        | 301,469     |   |      |   |            |      |  |   |           |  
|(Gain) loss on sale of investments                                                                                       |  |                        | (1,448,344  | ) |      |   | 5,545,902   |      |  |   | (2,494,110 | )
|Loss on disposal of fixed assets                                                                                         |  |                        | 37,263      |   |      |   |            |      |  |   |           |  
|Bad debt expense                                                                                                         |  |                        | 108,943     |   |      |   | 179,980     |      |  |   | 22,537     |  
|Stock compensation                                                                                                       |  |                        | 504,589     |   |      |   |            |      |  |   |           |  
|Deferred income taxes                                                                                                    |  |                        | (2,911,021  | ) |      |   | 1,276,296   |      |  |   | 1,381,616  |  
|Investment securities received in connection with the sale of technology rights                                          |  |                        | (51,190,576 | ) |      |   | (18,034,510 | )    |  |   | (5,092,399 | )
|Consulting and other services rendered in exchange for investment securities                                             |  |                        | (2,104,287  | ) |      |   | (1,404,096  | )    |  |   | (1,020,677 | )
|Changes in operating assets and liabilities:                                                                             |  |                        |             |   |      |   |             |      |  |   |            |  
|Accounts receivable                                                                                                      |  |                        | 55,859      |   |      |   | (576,419    | )    |  |   | 51,852     |  
|Prepaid expenses and other assets                                                                                        |  |                        | 73,801      |   |      |   | (88,130     | )    |  |   | (92,694    | )
|Deferred revenue                                                                                                         |  |                        | (22,145     | ) |      |   | 116,052     |      |  |   | (96,505    | )
|Accrued expenses                                                                                                         |  |                        | 48,969      |   |      |   | (404,832    | )    |  |   | 397,088    |  
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Net cash flows from operating activities                                                                                 |  |                        | (19,946,020 | ) |      |   | (10,616,886 | )    |  |   | (4,248,045 | )
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Investing Activities:                                                                                                    |  |                        |             |   |      |   |             |      |  |   |            |  
|Proceeds received on sale of equity investments                                                                          |  |                        | 9,740,302   |   |      |   | 3,097,496   |      |  |   | 2,794,186  |  
|Purchase of investment securities                                                                                        |  |                        | (642,638    | ) |      |   | (6,800,319  | )    |  |   | (5,960,926 | )
|Purchases of fixed assets                                                                                                |  |                        | (443,536    | ) |      |   | (138,402    | )    |  |   | (79,855    | )
|Net proceeds from sale (purchases) of short-term investments                                                             |  |                        | 7,016,706   |   |      |   |            |      |  |   |           |  
|Acquisition of 22ndStreet of Ybor City, Inc.                                                                             |  |                        | (1,000,000  | ) |      |   |            |      |  |   |           |  
|Acquisition of Knowledge Express (net cash acquired $26,423)                                                             |  |                        |            |   |      |   | (1,473,577  | )    |  |   | 30,188     |  
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Net cash flows from investing activities                                                                                 |  |                        | 14,670,834  |   |      |   | (5,314,802  | )    |  |   | (3,216,407 | )
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Financing Activities:                                                                                                    |  |                        |             |   |      |   |             |      |  |   |            |  
|Net proceeds from issuance of common stock                                                                               |  |                        | 8,955,182   |   |      |   | 15,794,705  |      |  |   | 6,752,642  |  
|Proceeds from exercise of stock options / warrants                                                                       |  |                        | 755,518     |   |      |   | 1,663,300   |      |  |   | 1,017,875  |  
|Distributions to stockholders                                                                                            |  |                        | (177,865    | ) |      |   |            |      |  |   |           |  
|Payments on bank debt                                                                                                    |  |                        |            |   |      |   | (23,516     | )    |  |   | (262,292   | )
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Net cash flows from financing activities                                                                                 |  |                        | 9,532,835   |   |      |   | 17,434,489  |      |  |   | 7,508,225  |  
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Foreign currency translation adjustment                                                                                  |  |                        | 151,836     |   |      |   | (16,357     | )    |  |   | 41,082     |  
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Increase in cash and cash equivalents                                                                                    |  |                        | 4,409,485   |   |      |   | 1,486,444   |      |  |   | 84,855     |  
|Cash and cash equivalents at beginning of period                                                                         |  |                        | 5,275,626   |   |      |   | 3,789,182   |      |  |   | 3,704,327  |  
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  
|Cash and cash equivalents at end of period                                                                               |  | $                      | 9,685,111   |   |      | $ | 5,275,626   |      |  | $ | 3,789,182  |  
|                                                                                                                         |  |                        |             |   |      |   |             |      |  |   |            |  

See accompanying notes



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UTEK Corporation

Consolidated Statements of Cash FlowsContinued



|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                                                                                                                                                                  |  | Year ended December 31
|                                                                                                                                                                                  |  | 2006                   |           | 2005 |   | 2004     
|Supplemental Disclosures of Non-Cash Investing Activities                                                                                                                         |  |                        |           |      |   |           |  |   |          
|Investment securities received for unearned strategic alliance services (net)                                                                                                     |  | $                      | 2,030,874 |      | $ | 1,862,775 |  | $ | 1,473,918
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|Dividend declared not paid                                                                                                                                                        |  | $                      | 179,032   |      | $ |          |  | $ |         
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company issued 82,919 shares of common stock to purchase 22ndStreet of Ybor City Group, Inc.                                                                                  |  | $                      | 1,000,000 |      |   |           |  |   |          
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company purchased all of the capital stock of INTRA-DMS, Ltd. for $300,000 in common stock. In conjunction with the acquisition,
liabilities were assumed as follows:         |  |                        |           |      |   |           |  |   |          
|Fair value of assets acquired                                                                                                                                                     |  |                        |           |      | $ | 502,035   |  |   |          
|Consideration given                                                                                                                                                               |  |                        |           |      |   | 300,000   |  |   |          
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|Liabilities assumed                                                                                                                                                               |  |                        |           |      | $ | 202,035   |  |   |          
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company issued 119,134 shares of common stock issued to purchase Ybor City Group, Inc.                                                                                        |  |                        |           |      | $ | 1,650,000 |  |   |          
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company issued 125,715 Shares of Common Stock Issued in Settlement of Note Payable                                                                                            |  |                        |           |      |   |           |  | $ | 847,890  
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company purchased all of the capital stock of UTEK-EKMS, Inc. for $300,000 in common stock. In conjunction with the acquisition,
liabilities were assumed as follows:         |  |                        |           |      |   |           |  |   |          
|Fair value of assets acquired                                                                                                                                                     |  |                        |           |      |   |           |  | $ | 572,030  
|Consideration given                                                                                                                                                               |  |                        |           |      |   |           |  |   | 300,000  
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|Liabilities assumed                                                                                                                                                               |  |                        |           |      |   |           |  | $ | 272,300  
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company purchased all of the capital stock of Pharma-Transfer, Ltd. for $435,000 in common stock. In conjunction with the acquisition,
liabilities were assumed as follows:   |  |                        |           |      |   |           |  |   |          
|Fair value of assets acquired                                                                                                                                                     |  |                        |           |      |   |           |  | $ | 674,129  
|Consideration given                                                                                                                                                               |  |                        |           |      |   |           |  |   | 435,000  
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|Liabilities assumed                                                                                                                                                               |  |                        |           |      |   |           |  | $ | 239,129  
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|The Company purchased all of the capital stock of ABM of Tampa Bay, Inc., for $300,000 in common stock. In conjunction with the acquisition,
liabilities were assumed as follows: |  |                        |           |      |   |           |  |   |          
|Fair value of assets acquired                                                                                                                                                     |  |                        |           |      |   |           |  | $ | 300,000  
|Consideration given                                                                                                                                                               |  |                        |           |      |   |           |  |   | 300,000  
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          
|Liabilities assumed                                                                                                                                                               |  |                        |           |      |   |           |  | $ | 0        
|                                                                                                                                                                                  |  |                        |           |      |   |           |  |   |          



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UTEK Corporation

Consolidated Statements of Changes in Net Assets



|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                                                                                       |  | Year ended December 31 |            
|                                                                                                                                                                       |  | 2006                   |             |   | 2005 |   |            | 2004 | 
|Changes in net assets from operations:                                                                                                                                 |  |                        |             |   |      |   |            |      |  |   |            |  
|Net income from operations                                                                                                                                             |  | $                      | 19,944,207  |   |      | $ | 5,887,830  |      |  | $ | 942,722    |  
|Net realized gain (loss) on sale of investments, net of related income taxes                                                                                           |  |                        | 903,181     |   |      |   | (3,458,979 | )    |  |   | 1,555,576  |  
|Change in net unrealized depreciation of investments, net of related deferred taxes                                                                                    |  |                        | (25,758,186 | ) |      |   | (333,176   | )    |  |   | (238,214   | )
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Net (decrease) increase in net assets from operations                                                                                                                  |  |                        | (4,910,798  | ) |      |   | 2,095,675  |      |  |   | 2,260,084  |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Distributions to Stockholders (Paid or Declared):                                                                                                                      |  |                        |             |   |      |   |            |      |  |   |            |  
|From net income                                                                                                                                                        |  |                        | (356,897    | ) |      |   |           |      |  |   |           |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Capital stock transactions:                                                                                                                                            |  |                        |             |   |      |   |            |      |  |   |            |  
|Proceeds from issuance of common stock net of offering costs of $1,044,860, $2,036,042 and $935,758 for the years ended December 31,
2006, 2005 and 2004, respectively |  |                        | 8,955,182   |   |      |   | 15,794,705 |      |  |   | 6,738,642  |  
|Proceeds from the exercise of stock options                                                                                                                            |  |                        | 755,518     |   |      |   | 1,663,300  |      |  |   | 1,017,875  |  
|Issuance of stock options for compensation                                                                                                                             |  |                        | 504,587     |   |      |   |           |      |  |   |           |  
|Deferred tax related to stock-based compensation expense                                                                                                               |  |                        | 440,616     |   |      |   |           |      |  |   |           |  
|Common stock issued in settlement of note payable                                                                                                                      |  |                        |            |   |      |   |           |      |  |   | 847,890    |  
|Common stock issued in acquisition of 22ndStreet of Ybor City, Inc.                                                                                                    |  |                        | 1,000,000   |   |      |   |           |      |  |   |           |  
|Common stock issued in acquisition of Ybor City Group, Inc.                                                                                                            |  |                        |            |   |      |   | 1,650,000  |      |  |   |           |  
|Common stock issued in acquisition of UTEKip, Ltd.                                                                                                                     |  |                        |            |   |      |   | 300,000    |      |  |   |           |  
|Common stock issued in acquisition of UTEK-EKMS, Inc.                                                                                                                  |  |                        |            |   |      |   |           |      |  |   | 300,000    |  
|Common stock issued in acquisition of Pharma Transfer, Ltd.                                                                                                            |  |                        |            |   |      |   |           |      |  |   | 435,000    |  
|Common stock issued in acquisition of ABM of Tampa Bay, Inc.                                                                                                           |  |                        |            |   |      |   |           |      |  |   | 300,000    |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Net increase in net assets from stock transactions                                                                                                                     |  |                        | 11,655,903  |   |      |   | 19,408,005 |      |  |   | 9,639,407  |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Foreign currency translation adjustment                                                                                                                                |  |                        | 151,836     |   |      |   | (155,505   | )    |  |   | 41,082     |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Net increase in net assets                                                                                                                                             |  |                        | 6,540,044   |   |      |   | 21,348,175 |      |  |   | 11,940,573 |  
|Net assets at beginning of year                                                                                                                                        |  |                        | 44,441,118  |   |      |   | 23,092,943 |      |  |   | 11,152,370 |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  
|Net assets at end of year                                                                                                                                              |  | $                      | 50,981,162  |   |      | $ | 44,441,118 |      |  | $ | 23,092,943 |  
|                                                                                                                                                                       |  |                        |             |   |      |   |            |      |  |   |            |  

See accompanying notes



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UTEK CORPORATION

Consolidated Schedule of Investments

December 31, 2006



|          |  |                           |  |                                                                                     |  |                    |           |       |   |                        |  |     |  
|--------- |  | ------------------------- |  | ----------------------------------------------------------------------------------- |  | ------------------ | --------- | ----- | - | ---------------------- |  | --- | -
|Shares    |  | Initial DateofAcquisition |  | Non-Affiliate Investments (1)                                                       |  | OriginalCost Basis |           | Value |   | Percentageof NetAssets | 
|          |  |                           |  | Advanced Refractive Technologies, Inc. Opthalmic technologies                       |  |                    |           |       |   |                        |  |     |  
|100,000   |  | 4/06                      |  | Preferred D Stock                                                                   |  | $                  | 1,996,176 |       | $ | 1,400,000              |  | 2.7 | %
|97,000    |  | 3/06                      |  | Preferred C Stock                                                                   |  |                    | 2,066,063 |       |   | 1,358,000              |  | 2.7 |  
|97,000    |  | 12/05                     |  | Preferred B Stock                                                                   |  |                    | 1,032,675 |       |   | 705,700                |  | 1.4 |  
|5,533,333 |  | 5/05                      |  | Common Stock                                                                        |  |                    | 158,364   |       |   | 26,200                 |  | 0.1 |  
|          |  |                           |  | World Energy Solutions, Inc. Energy saving technologies                             |  |                    |           |       |   |                        |  |     |  
|100,000   |  | 10/06                     |  | Preferred A Stock                                                                   |  |                    | 2,632,500 |       |   | 2,430,000              |  | 4.8 |  
|201,672   |  | 9/05                      |  | Common Stock                                                                        |  |                    | 127,714   |       |   | 36,300                 |  | 0.1 |  
|          |  |                           |  | Advanced Medical Isotope Corporation (11) Development of isotopes to treat diseases |  |                    |           |       |   |                        |  |     |  
|95,000    |  | 9/06                      |  | Preferred Stock                                                                     |  |                    | 1,803,417 |       |   | 1,591,300              |  | 3.1 |  
|600,000   |  | 5/06                      |  | Common Stock                                                                        |  |                    | 63,000    |       |   | 96,000                 |  | 0.2 |  
|          |  |                           |  | Cyberlux Corporation LED lighting solutions                                         |  |                    |           |       |   |                        |  |     |  
|98,000    |  | 11/06                     |  | Preferred C Stock                                                                   |  |                    | 1,605,240 |       |   | 1,605,200              |  | 3.1 |  
|1,481,484 |  | 6/06                      |  | Common Stock                                                                        |  |                    | 80,820    |       |   | 40,000                 |  | 0.1 |  
|          |  |                           |  | American Soil Technologies, Inc. Fertilizer innovation                              |  |                    |           |       |   |                        |  |     |  
|4,275,000 |  | 3/06                      |  | Preferred B Stock                                                                   |  |                    | 1,571,691 |       |   | 1,432,100              |  | 2.8 |  
|317,857   |  | 9/05                      |  | Common Stock                                                                        |  |                    | 70,388    |       |   | 56,700                 |  | 0.1 |  
|6,368,802 |  | 9/04                      |  | Material Technologies, Inc. Metal fatigue detection                                 |  |                    | 1,839,969 |       |   | 891,600                |  | 1.7 |  
|984,360   |  | 8/05                      |  | Broadcast International, Inc. Telecommunications                                    |  |                    | 1,223,592 |       |   | 863,800                |  | 1.7 |  
|          |  |                           |  | UBA Technology, Inc. (8) Software development                                       |  |                    |           |       |   |                        |  |     |  
|2,482,521 |  | 2/06                      |  | Common Stock                                                                        |  |                    | 1,691,419 |       |   | 600                    |  | <.1 |  
|95,000    |  | 4/06                      |  | Convertible Preferred A                                                             |  |                    | 1,619,849 |       |   | 714,600                |  | 1.4 |  
|146,586   |  | 4/04                      |  | Xethanol Corporation(8) (12) Bioethanol and derivative products                     |  |                    | 964,599   |       |   | 299,500                |  | 0.6 |  
|171,432   |  | 11/05                     |  | Shumate Industries, Inc. Energy field service applications                          |  |                    | 78,852    |       |   | 205,200                |  | 0.4 |  
|60,000    |  | 12/05                     |  | Metamorphix Global (privately held) (12) Design and manufacture of countertops      |  |                    | 120,000   |       |   | 120,000                |  | 0.2 |  
|40,000    |  | 7/06                      |  | Bacterin International(privately held) Bioactive coatings for medical devices       |  |                    | 120,000   |       |   | 120,000                |  | 0.2 |  
|120,000   |  | 4/05                      |  | Rival Technologies, Inc. Diesel engine technologies                                 |  |                    | 82,104    |       |   | 96,900                 |  | 0.2 |  
|1,250,010 |  | 5/06                      |  | In Veritas Medical Diagnostics, Inc. Medical devices designs and testing            |  |                    | 74,400    |       |   | 63,800                 |  | 0.1 |  
|171,432   |  | 10/06                     |  | GammaCan International, inc. Anti-cancer immunotherapy                              |  |                    | 83,016    |       |   | 51,400                 |  | 0.1 |  



45



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|          |  |                           |  |                                                                         |  |                   |  |        |  |                       
|--------- |  | ------------------------- |  | ----------------------------------------------------------------------- |  | ----------------- |  | ------ |  | ----------------------
|Shares    |  | Initial DateofAcquisition |  | Non-Affiliate Investments (1)                                           |  | OriginalCostBasis |  | Value  |  | Percentageof NetAssets
|109,091   |  | 7/06                      |  | Turbine Truck Engines, Inc. Heavy-duty highway truck engines            |  | 72,000            |  | 39,300 |  | 0.1                   
|176,250   |  | 4/05                      |  | Maelor Plc(5) Products for niche healthcare applications                |  | 24,147            |  | 34,200 |  | 0.1                   
|1,411,765 |  | 7/06                      |  | MM2 Group, Inc. Financial consulting for nutraceuticals                 |  | 56,004            |  | 33,900 |  | 0.1                   
|2,011,765 |  | 5/06                      |  | Rheologics, Inc.(8) Study of blood viscosity                            |  | 86,100            |  | 28,200 |  | 0.1                   
|1,635,000 |  | 3/04                      |  | Swiss Medica, Inc. Health bioscience products                           |  | 304,988           |  | 28,000 |  | 0.1                   
|1,200,000 |  | 10/06                     |  | Laserlock Technologies, Inc. Security solutions for the gaming industry |  | 24,100            |  | 20,100 |  | <.1                   
|269,230   |  | 8/06                      |  | Protocall Technologies, Inc. On-demand software and entertainment       |  | 11,577            |  | 19,500 |  | <.1                   
|33,825    |  | 5/05                      |  | XLER8, Inc. (Vitacube Systems, Inc). Specialty nutraceuticals           |  | 16,427            |  | 18,900 |  | <.1                   
|387,097   |  | 6/06                      |  | Tradequest International, Inc. Provider of voice over internet protocol |  | 76,092            |  | 18,600 |  | <.1                   
|697,860   |  | 8/06                      |  | Magnitude Information Systems, Inc. Computer ergonomics                 |  | 25,920            |  | 17,800 |  | <.1                   
|232,211   |  | 5/05                      |  | Preservation Sciences, Inc. Metal and concrete coatings                 |  |                  |  | 17,800 |  | <.1                   
|122,449   |  | 1/06                      |  | 5G Wireless Communications, Inc. Broadband wireless                     |  | 78,851            |  | 14,300 |  | <.1                   
|221,033   |  | 4/04                      |  | Power3 Medical Products, Inc. Healthcare products                       |  | 201,599           |  | 13,900 |  | <.1                   
|180,000   |  | 5/06                      |  | U.S. Starcom, Inc. Communications services and products                 |  | 17,181            |  | 13,800 |  | <.1                   
|750,000   |  | 10/04                     |  | U.S. Wireless Online, Inc. Wireless broadband networks                  |  | 66,000            |  | 9,100  |  | <.1                   
|258,064   |  | 5/06                      |  | IPORUSSIA, Inc. Business advisory services provider                     |  | 24,000            |  | 8,800  |  | <.1                   
|115,069   |  | 7/06                      |  | Inverted Paradigms Corporation Safety and security software             |  | 32,510            |  | 6,400  |  | <.1                   
|105,600   |  | 5/06                      |  | HumWare Media Corporation Media advertising                             |  | 14,236            |  | 5,900  |  | <.1                   
|384,000   |  | 7/06                      |  | aeroTelesis, Inc. Satellite and wireless bandwidth utilization          |  | 33,394            |  | 4,300  |  | <.1                   
|774,951   |  | 6/06                      |  | Universal Detection Technology Detection devices for bacterial spores   |  | 30,378            |  | 3,600  |  | <.1                   
|660,000   |  | 6/05                      |  | BP International, Inc. Shade structures                                 |  | 78,852            |  | 3,300  |  | <.1                   
|2,335,977 |  | 7/06                      |  | PracticeXpert, Inc. Operational efficiencies for medical practitioners  |  | 27,172            |  | 3,300  |  | <.1                   
|808,529   |  | 4/04                      |  | HydroFlo, Inc.(6) Business development company                          |  | 125,861           |  | 3,000  |  | <.1                   
|85,714    |  | 9/05                      |  | New Life Scientific, Inc. Pharmaceutical biotechnologies                |  | 81,816            |  | 2,900  |  | <.1                   



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|            |  |                           |  |                                                                              |  |                    |            |       |   |                        |  |      |  
|----------- |  | ------------------------- |  | ---------------------------------------------------------------------------- |  | ------------------ | ---------- | ----- | - | ---------------------- |  | ---- | -
|Shares      |  | Initial DateofAcquisition |  | Non-Affiliate Investments (1)                                                |  | Original CostBasis |            | Value |   | Percentageof NetAssets | 
|666,668     |  | 9/05                      |  | Quest Minerals & Mining Corporation Coal and mineral mining                  |  |                    | 69,044     |       |   | 1,800                  |  | <.1  |  
|50,925      |  | 7/06                      |  | Global General Technologies, Inc. Homeland security systems                  |  |                    | 13,228     |       |   | 1,700                  |  | <.1  |  
|37,500      |  | 6/05                      |  | Modern Technology Corporation Technology development and acquisition company |  |                    | 82,152     |       |   | 1,400                  |  | <.1  |  
|140,000     |  | 3/05                      |  | AdAl Group, Inc.(5) Aluminum extruded products manufacturer                  |  |                    | 72,912     |       |   |                       |  | 0.0  |  
|7,787,565   |  | 6/05                      |  | Trio Industries Group, Inc.(8) Protective powder coating                     |  |                    | 12,330,401 |       |   |                       |  | 0.0  |  
|            |  |                           |  | KP Renewables Plc (Kwikpower International Plc)(5) Renewable energy          |  |                    |            |       |   |                        |  |      |  
|            |  | 5/06                      |  | Convertible Debenture, due 5/10/07                                           |  |                    | 4,433,401  |       |   |                       |  | 0.0  |  
|            |  | 9/05                      |  | Convertible Debenture, due 9/30/06                                           |  |                    | 1,884,920  |       |   |                       |  | 0.0  |  
|50,000      |  | 3/05                      |  | Common Stock                                                                 |  |                    | 94,500     |       |   |                       |  | 0.0  |  
|261,234     |  | 7/04                      |  | eLinear, Inc.(5) Telecommunication security provider                         |  |                    | 190,763    |       |   |                       |  | 0.0  |  
|            |  |                           |  |                                                                              |  |                    |            |       |   |                        |  |      |  
|            |  |                           |  | Total Investments in Non-Affiliates                                          |  | $                  | 41,786,374 |       | $ | 14,578,700             |  | 28.6 | %
|            |  |                           |  |                                                                              |  |                    |            |       |   |                        |  |      |  
|            |  |                           |  |                                                                              | 
|            |  |                           |  | Affiliate Investments (2)                                                    |  |                    |            |       |   |                        | 
|9,900,717   |  | 4/05                      |  | Fuel FX International, Inc. Reductional environmental emissions Common stock |  | $                  | 1,980,142  |       | $ | 1,831,600              |  | 3.6  | %
|100,000     |  | 1/06                      |  | Preferred Series B Stock                                                     |  |                    | 2,100,000  |       |   | 990,000                |  | 1.9  |  
|4,444,876   |  | 5/06                      |  | DME Interactive Holdings, Inc.(9) Multi-media entertainment                  |  |                    | 769,820    |       |   | 1,344,600              |  | 2.6  |  
|35,131,142  |  | 5/06                      |  | Avalon Oil and Gas, Inc. Oil and gas producers                               |  |                    | 1,986,939  |       |   | 864,200                |  | 1.7  |  
|2,040,000   |  | 4/06                      |  | Cytodyn, Inc. (9) Development stage biotechnology company                    |  |                    | 3,640,772  |       |   | 856,800                |  | 1.7  |  
|33,730,000  |  | 4/05                      |  | WebSky Inc. Broadband wireless                                               |  |                    | 897,750    |       |   | 674,600                |  | 1.3  |  
|164,951,070 |  | 8/06                      |  | Cargo Connection Logistics Holdings, Inc. World trade logistics              |  |                    | 1,033,434  |       |   | 643,300                |  | 1.3  |  
|8,512,064   |  | 4/04                      |  | Manakoa Services Company(11) Compliance analysis and monitoring              |  |                    | 2,306,893  |       |   | 415,000                |  | 0.8  |  
|7,165,000   |  | 5/06                      |  | NetFabric Holdings, Inc.(9) Information technology services                  |  |                    | 608,694    |       |   | 394,000                |  | 0.8  |  
|461,222,608 |  | 9/05                      |  | GS Energy Corporation (INSEQ Corp.) Waste minimization                       |  |                    | 2,434,783  |       |   | 269,800                |  | 0.5  |  
|16,037,500  |  | 7/06                      |  | Liberty Diversified Holdings, Inc. Printing and packaging                    |  |                    | 1,245,258  |       |   | 187,600                |  | 0.4  |  
|4,221,165   |  | 4/01                      |  | Stealth MediaLabs, Inc. Software products                                    |  |                    | 1,708,000  |       |   | 121,600                |  | 0.2  |  
|3,023,703   |  | 3/04                      |  | Health Sciences Group, Inc. Nutraceutical and pharmaceutical products        |  |                    | 1,601,963  |       |   | 95,200                 |  | 0.2  |  
|2,560,000   |  | 8/04                      |  | TenthGate, Inc.(9) Healthcare related products and services                  |  |                    | 40,000     |       |   | 25,600                 |  | <.1  |  
|            |  |                           |  |                                                                              |  |                    |            |       |   |                        |  |      |  
|            |  |                           |  | Total Investments in Affiliates                                              |  | $                  | 22,354,448 |       | $ | 8,713,900              |  | 17.1 | %
|            |  |                           |  |                                                                              |  |                    |            |       |   |                        |  |      |  



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|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|---------- |  | ------------------------- |  | ----------------------------------------------------------------------------------------- |  | ------------------ | ---------- | ----- | - | ---------------------- |  | ----- | -
|Shares     |  | Initial DateofAcquisition |  | Control Investments (3)                                                                   |  | Original CostBasis |            | Value |   | Percentageof NetAssets | 
|1,000      |  | 11/99                     |  | UTEK Real Estate Holdings, Inc., (privately held) Real estate development                 |  | $                  | 4,131,574  |       | $ | 3,614,500              |  | 7.1   | %
|52,192,755 |  | 3/06                      |  | Klegg Electronics, Inc.(10) Manufacturer/distributor for retail electronic products       |  |                    | 3,820,274  |       |   | 3,209,900              |  | 6.3   |  
|21,933,451 |  | 8/05                      |  | Industrial Biotechnology Corporation (10) Manufactures and markets flavors and fragrances |  |                    | 6,351,998  |       |   | 1,995,900              |  | 3.9   |  
|(10)       |  | 1/06                      |  | Ybor City Group, Inc. (privately held) (Demand note, interest rate @ 5%)                  |  |                    | 1,181,472  |       |   | 1,181,472              |  | 2.3   |  
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Total Investments in Control Investments                                                  |  | $                  | 15,485,318 |       | $ | 10,001,772             |  | 19.6  | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  |                                                                                           | 
|           |  |                           |  | U.S. Treasuries and Certificates of Deposit (4)                                           |  |                    |            |       |   |                        | 
|Par Value  |  |                           |  |                                                                                           |  |                    |            |       |   |                        | 
|           |  |                           |  | U.S. Treasuries:                                                                          |  |                    |            |       |   |                        |  |       |  
|2,000,000  |  | 8/06                      |  | United States Treasury, maturity 1/18/07, interest rate @ 5.045%                          |  | $                  | 1,996,481  |       | $ | 1,996,481              |  | 3.9   | %
|1,500,000  |  | 8/06                      |  | United States Treasury, maturity 2/01/07, interest rate @ 4.952%                          |  |                    | 1,494,092  |       |   | 1,494,092              |  | 2.9   |  
|1,000,000  |  | 8/06                      |  | United States Treasury, maturity 2/15/07, interest rate @ 4.751%                          |  |                    | 994,078    |       |   | 994,078                |  | 1.9   |  
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Total U.S. Treasuries                                                                     |  | $                  | 4,484,651  |       | $ | 4,484,651              |  | 8.8   | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Certificates of Deposit:                                                                  |  |                    |            |       |   |                        |  |       |  
|100,000    |  | 8/06                      |  | Washington Mutual Bank CD, maturity 1/30/07, interest rate @ 5.00%                        |  | $                  | 100,000    |       | $ | 100,000                |  | 0.2   | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Total Certificates of Deposit                                                             |  | $                  | 100,000    |       | $ | 100,000                |  | 0.2   | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Total Investments in U.S. Treasuries and CDs                                              |  | $                  | 4,584,651  |       | $ | 4,584,651              |  | 9.0   | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | TOTAL INVESTMENTS                                                                         |  | $                  | 84,210,791 |       | $ | 37,879,023             |  | 74.3  | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Cash and other assets, less liabilities                                                   |  |                    |            |       |   | 13,102,139             |  | 25.7  | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  
|           |  |                           |  | Net assets at December 31, 2006                                                           |  |                    |            |       | $ | 50,981,162             |  | 100.0 | %
|           |  |                           |  |                                                                                           |  |                    |            |       |   |                        |  |       |  

Notes to Schedule of Investments:



| |  |  | Except where otherwise noted, all of our investments listed above are in common stock of companies that are publicly quoted on the OTC Bulletin Board or listed on
the American Stock Exchange or other similar markets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The above investments, with the exception of the U.S. Treasuries and certificates of deposits, are non-income producing. Equity investments that have not paid
dividends within the last twelve months are considered non-income producing.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors. In making its determination,
the Board of Directors has considered valuation appraisals provided by an independent valuation service provider. (See Note 2 to the consolidated financial statements.)
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of December 31, 2006, all of the securities that we own are subject to legal restrictions on resale. As a result, our ability to sell or otherwise transfer
the securities we hold in our portfolio is limited.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|(1) | Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting
securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company
owns more than 25% of the voting securities. We own 100% of UTEK Real Estate Holdings, Inc. (UREHI), which holds four investments: Rosbon LLC, ABM of Tampa Bay, Inc., 22ndStreet of Ybor City, Inc. and Ybor City Group, Inc. UREHI holds 150 equity interests of the total equity interests outstanding of Rosbon LLC and all of the
outstanding shares of capital stock of ABM of Tampa Bay, Inc., 22ndStreet of Ybor City, Inc. and Ybor City Group,
Inc.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The Company invests excess cash in a number of U.S. Treasury Bills and certificates of deposit. These short-term investments normally have three month to one year maturities and do
not qualify as cash or cash equivalents.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Non-U.S. company or the companys principal place of business is outside the U.S.
|--- | ---------------------------------------------------------------------------------

|(6) | Closed-end management investment company that has elected to be regulated as a business development company under the Investment Act of 1940. During the nine months ended
September 30, 2006, the Company made a gift of 5.1 million shares of HydroFlo, Inc. common stock to certain not-for-profit institutions and abandoned its right, title and interest in and to 400,000 shares of HydroFlo, Inc.s common
stock (See note 2 to the consolidated financial statements).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Investment consists of a loan receivable.
|--- | -----------------------------------------

|(8) | During the period ended December 31, 2006, the Company reclassified this investment from Affiliate investments to Non-affiliate investments based on the criteria in notes
(1) and (2).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | During the period ended December 31, 2006, the Company reclassified this investment from Non-affiliated investments to Affiliate investments based on the criteria in notes
(1) and (2).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | During the period ended December 31, 2006, the Company reclassified this investment from Affiliate investments to Control investments based on the criteria in notes
(2) and (3).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Advanced Medical Isotope Corporation and Manakoa Services Company are related parties through common management.
|---- | ----------------------------------------------------------------------------------------------------------------

|(12) | Xethanol Corporation and Metamorphix Global are parties related though common management.
|---- | -----------------------------------------------------------------------------------------

See accompanying notes



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UTEK CORPORATION

Consolidated Schedule of Investments

December 31, 2005



|           |  |                            |  |                                                                                         |  |                     |           |       |   |                          |  |      |  
|---------- |  | -------------------------- |  | --------------------------------------------------------------------------------------- |  | ------------------- | --------- | ----- | - | ------------------------ |  | ---- | -
|Shares     |  | Initial Dateof Acquisition |  | Non-Affiliate Investments (1)                                                           |  | Original Cost Basis |           | Value |   | Percentage of Net Assets | 
|13,240,000 |  | 8/05                       |  | Industrial Biotechnology Corp. Manufactures and markets flavors and fragrances          |  | $                   | 2,170,068 |       | $ | 5,693,200                |  | 12.8 | %
|1,200,275  |  | 4/04                       |  | Xethanol Corporation (9) Bioethanol and derivative products                             |  |                     | 3,463,007 |       |   | 3,480,797                |  | 7.8  |  
|           |  |                            |  | KP Renewables Plc (Kwikpower International Plc)(5) Renewable energy                     |  |                     |           |       |   |                          |  |      |  
|(6)        |  | 9/05                       |  | Convertible Debenture, due 9/30/06                                                      |  |                     | 1,884,920 |       |   | 1,666,666                |  | 3.7  |  
|50,000     |  | 3/05                       |  | Common Stock                                                                            |  |                     | 94,500    |       |   | 42,000                   |  | 0.1  |  
|973,508    |  | 1/02                       |  | Circle Group Holdings, Inc. Small business holding company                              |  |                     | 430,506   |       |   | 973,508                  |  | 2.2  |  
|97,000     |  | 12/05                      |  | Advanced Refractive Technologies, Inc. (preferred stock) Opthalmic technologies         |  |                     | 1,114,671 |       |   | 964,075                  |  | 2.1  |  
|1,533,333  |  | 5/05                       |  | Advanced Refractive Technologies, Inc. (Visijet, Inc.) Ophthalmic technologies          |  |                     | 81,996    |       |   | 15,333                   |  | 0.1  |  
|250,000    |  | 5/05                       |  | Harborlight Diversified Fund, LP(privately held) (7) Diversified mutual and hedge funds |  |                     | 250,000   |       |   | 262,020                  |  | 0.5  |  
|50,000     |  | 7/05                       |  | Israel Technology Acquisition Corporation(5) Special purpose acquisitions               |  |                     | 300,000   |       |   | 251,500                  |  | 0.5  |  
|40,000     |  | 7/05                       |  | Fortress America Acquisition Corporation Special purpose acquisitions                   |  |                     | 240,000   |       |   | 240,800                  |  | 0.5  |  
|359,182    |  | 4/05                       |  | NutraCea International Corporation Rice bran research and development                   |  |                     | 147,265   |       |   | 204,734                  |  | 0.4  |  
|2,100,000  |  | 3/04                       |  | Swiss Medica, Inc. Health bioscience products                                           |  |                     | 381,268   |       |   | 191,100                  |  | 0.4  |  
|720,637    |  | 4/03                       |  | Intra-Asia Entertainment Corporation Digital television entertainment                   |  |                     | 1,607,494 |       |   | 136,921                  |  | 0.3  |  
|645,000    |  | 3/03                       |  | Sequiam Corporation Authentication and biometrics technologies                          |  |                     | 185,726   |       |   | 135,450                  |  | 0.3  |  
|60,000     |  | 12/05                      |  | Metamorphix Global (privately held)(9) Design and manufacture of countertops            |  |                     | 120,000   |       |   | 120,000                  |  | 0.2  |  
|800,000    |  | 9/05                       |  | Quest Minerals & Mining Corporation Coal and mineral mining                             |  |                     | 81,228    |       |   | 104,000                  |  | 0.2  |  
|171,432    |  | 11/05                      |  | Shumate Industries, Inc. Energy field service applications                              |  |                     | 78,852    |       |   | 94,288                   |  | 0.2  |  
|120,000    |  | 4/05                       |  | Rival Technologies, Inc. Diesel engine technologies                                     |  |                     | 82,104    |       |   | 76,800                   |  | 0.2  |  
|30,379     |  | 12/05                      |  | Amazing Technologies Corporation Web services supplier and integrator                   |  |                     | 77,544    |       |   | 76,555                   |  | 0.2  |  



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|        |  |                            |  |                                                                              |  |                     |            |       |   |                          |  |      |  
|------- |  | -------------------------- |  | ---------------------------------------------------------------------------- |  | ------------------- | ---------- | ----- | - | ------------------------ |  | ---- | -
|Shares  |  | Initial Dateof Acquisition |  | Non-Affiliate Investments (1)                                                |  | Original Cost Basis |            | Value |   | Percentage of Net Assets | 
|261,234 |  | 7/04                       |  | eLinear, Inc. (5) Telecommunication security provider                        |  |                     | 190,763    |       |   | 75,758                   |  | 0.2  |  
|750,000 |  | 10/04                      |  | U.S. Wireless Online, Inc. Wireless broadband networks                       |  |                     | 66,000     |       |   | 75,000                   |  | 0.2  |  
|91,885  |  | 10/04                      |  | Pacific Biometrics, Inc. Specialty central laboratory services               |  |                     | 59,356     |       |   | 74,427                   |  | 0.2  |  
|31,413  |  | 9/05                       |  | World Energy Solutions, Inc. Energy saving technologies                      |  |                     | 71,256     |       |   | 57,172                   |  | 0.1  |  
|342,857 |  | 9/05                       |  | American Soil Technologies, Inc. Fertilizer innovation                       |  |                     | 75,996     |       |   | 54,857                   |  | 0.1  |  
|54,857  |  | 5/05                       |  | Vitacube Systems Holding, Inc. Specialty nutraceuticals                      |  |                     | 84,852     |       |   | 54,308                   |  | 0.1  |  
|40,000  |  | 8/05                       |  | Broadcast International, Inc. Telecommunications                             |  |                     | 80,916     |       |   | 54,000                   |  | 0.1  |  
|660,000 |  | 6/05                       |  | BP International, Inc. Shade structures                                      |  |                     | 78,852     |       |   | 50,160                   |  | 0.1  |  
|333,332 |  | 5/05                       |  | Hybrid Fuel Systems, Inc. Patented natural gas/diesel dual fuel technology   |  |                     | 78,852     |       |   | 43,333                   |  | 0.1  |  
|29,999  |  | 7/04                       |  | INyX, Inc. Aerosol drug delivery                                             |  |                     | 19,813     |       |   | 41,399                   |  | 0.1  |  
|413,482 |  | 5/05                       |  | Preservation Sciences, Inc. Metal and concrete coatings                      |  |                     |           |       |   | 30,184                   |  | 0.1  |  
|675,032 |  | 6/03                       |  | E Med Future, Inc. Needle destruction device                                 |  |                     | 357,767    |       |   | 26,326                   |  | 0.1  |  
|750,000 |  | 6/05                       |  | Modern Technology Corporation Technology development and acquisition company |  |                     | 82,152     |       |   | 22,500                   |  | 0.1  |  
|221,033 |  | 4/04                       |  | Power3 Medical Products, Inc. Healthcare products                            |  |                     | 223,984    |       |   | 20,998                   |  | 0.1  |  
|140,000 |  | 3/05                       |  | AdAl Group, Inc.(5) Aluminum extruded products manufacturer                  |  |                     | 72,912     |       |   | 18,200                   |  | 0.1  |  
|85,714  |  | 9/05                       |  | New Life Scientific, Inc. Pharmaceutical biotechnologies                     |  |                     | 81,816     |       |   | 16,286                   |  | 0.1  |  
|176,250 |  | 4/05                       |  | Maelor Plc(5) Products for niche healthcare applications                     |  |                     | 24,147     |       |   | 16,039                   |  | 0.1  |  
|480,000 |  | 4/05                       |  | Websky Inc. Broadband wireless                                               |  |                     |           |       |   | 12,000                   |  | 0.1  |  
|61,224  |  | 3/04                       |  | eFoodSafety.com Inc. Safety of fruit, vegetables, poultry, beef and seafood  |  |                     | 20,863     |       |   | 9,796                    |  | 0.1  |  
|67,904  |  | 12/03                      |  | Magic Media Networks, Inc. Digital display monitor networks                  |  |                     | 7,831      |       |   | 6,722                    |  | <.1  |  
|36,923  |  | 9/04                       |  | Material Technologies, Inc. Metal fatigue detection                          |  |                     | 78,672     |       |   | 4,800                    |  | <.1  |  
|295,500 |  | 7/04                       |  | Veridium Corporation Environmental services business                         |  |                     | 69,032     |       |   | 3,546                    |  | <.1  |  
|14,796  |  | 1/04                       |  | GeneThera, Inc. Molecular biotechnology products                             |  |                     | 36,014     |       |   | 1,065                    |  | <.1  |  
|        |  |                            |  |                                                                              |  |                     |            |       |   |                          |  |      |  
|        |  |                            |  | Total Investments in Non-Affiliates                                          |  | $                   | 14,652,995 |       | $ | 15,498,623               |  | 34.9 | %
|        |  |                            |  |                                                                              |  |                     |            |       |   |                          |  |      |  



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|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  
|----------- |  | -------------------------- |  | -------------------------------------------------------------------------------- |  | ------------------- | ---------- | ----- | - | ------------------------ |  | ---- | -
|Shares      |  | Initial Dateof Acquisition |  | Affiliate Investments (2)                                                        |  | Original Cost Basis |            | Value |   | Percentage of Net Assets | 
|2,915,489   |  | 6/05                       |  | Trio Industries Group, Inc, Protective powder coating                            |  | $                   | 3,997,210  |       | $ | 4,985,486                |  | 11.2 |  
|9,900,717   |  | 4/05                       |  | Fuel FX International, Inc. (privately held) Reductional environmental emissions |  |                     | 1,980,142  |       |   | 1,980,143                |  | 4.5  |  
|3,123,703   |  | 3/04                       |  | Health Sciences Group, Inc. Nutraceutical and pharmaceutical products            |  |                     | 1,685,189  |       |   | 874,637                  |  | 2.0  |  
|484,782,608 |  | 9/05                       |  | INSEQ Corporation Waste minimization                                             |  |                     | 2,434,783  |       |   | 727,174                  |  | 1.6  |  
|6,343,573   |  | 4/04                       |  | HydroFlo, Inc.(8) Waste water treatment solutions                                |  |                     | 854,602    |       |   | 596,296                  |  | 1.4  |  
|7,647,561   |  | 4/04                       |  | Manakoa Services Company Compliance analysis and monitoring                      |  |                     | 2,258,837  |       |   | 504,739                  |  | 1.1  |  
|960,779     |  | 6/99                       |  | Clean Water Technologies, Inc. Environmental services                            |  |                     | 568,006    |       |   | 92,235                   |  | 0.2  |  
|480,000     |  | 8/04                       |  | TenthGate, Inc. Healthcare related products and services                         |  |                     |           |       |   | 3,840                    |  | <.1  |  
|4,221,165   |  | 4/01                       |  | Stealth MediaLabs, Inc. Software products                                        |  |                     | 1,708,000  |       |   |                         |  | 0.0  |  
|100,000     |  | 8/04                       |  | Myrmidon Biomaterials, Inc.(privately held) Biomaterial tendon replacement       |  |                     |           |       |   |                         |  | 0.0  |  
|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  
|            |  |                            |  | Total Investments in Affiliates                                                  |  | $                   | 15,486,769 |       | $ | 9,764,550                |  | 22.0 | %
|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  
|            |  |                            |  |                                                                                  | 
|            |  |                            |  | Controlled Investment (3)                                                        |  |                     |            |       |   |                          | 
|1,000       |  | 11/99                      |  | UTEK Real Estate Holdings, Inc. (privately held) Real estate development         |  | $                   | 2,126,573  |       | $ | 1,888,396                |  | 4.2  |  
|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  
|            |  |                            |  | Total Investment in Controlled Investment                                        |  | $                   | 2,126,573  |       | $ | 1,888,396                |  | 4.2  | %
|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  
|            |  |                            |  |                                                                                  | 
|            |  |                            |  | U.S. Treasuries and Certificates of Deposit (4)                                  |  |                     |            |       |   |                          | 
|Par Value   |  |                            |  |                                                                                  |  |                     |            |       |   |                          | 
|            |  |                            |  | U.S. Treasuries:                                                                 |  |                     |            |       |   |                          |  |      |  
|1,000,000   |  | 11/05                      |  | United States Treasury, maturity 1/19/06, interest rate @ 3.712%                 |  | $                   | 998,250    |       | $ | 998,250                  |  | 2.3  | %
|1,000,000   |  | 11/05                      |  | United States Treasury, maturity 2/23/06, interest rate @ 3,841%                 |  |                     | 994,600    |       |   | 994,600                  |  | 2.2  |  
|1,000,000   |  | 11/05                      |  | United States Treasury, maturity 4/20/06, interest rate @ 4.068%                 |  |                     | 988,010    |       |   | 988,010                  |  | 2.2  |  
|1,000,000   |  | 8/05                       |  | United States Treasury, maturity 5/15/06, interest rate @ 3.747%                 |  |                     | 984,330    |       |   | 984,330                  |  | 2.2  |  
|1,000,000   |  | 8/05                       |  | United States Treasury, maturity 5/15/06, interest rate @ 3.759%                 |  |                     | 984,330    |       |   | 984,330                  |  | 2.2  |  
|4,000,000   |  | 11/05                      |  | United States Treasury, maturity 8/15/06, interest rate @ 4.234%                 |  |                     | 3,894,200  |       |   | 3,894,200                |  | 8.8  |  
|1,000,000   |  | 11/05                      |  | United States Treasury, maturity 3/23/06, interest rate @ 3.923%                 |  |                     | 991,340    |       |   | 991,340                  |  | 2.2  |  
|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  
|            |  |                            |  | Total U.S. Treasuries                                                            |  | $                   | 9,835,060  |       | $ | 9,835,060                |  | 22.1 | %
|            |  |                            |  |                                                                                  |  |                     |            |       |   |                          |  |      |  



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|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  
|------- |  | -------------------------- |  | ------------------------------------------------------------------- |  | ------------------- | ---------- | ----- | - | ------------------------ |  | ----- | -
|Shares  |  | Initial Dateof Acquisition |  | U.S. Treasuries and Certificates of Deposit (4)                     |  | Original Cost Basis |            | Value |   | Percentage of Net Assets | 
|        |  |                            |  | Certificates of Deposit:                                            |  |                     |            |       |   |                          |  |       |  
|100,000 |  | 8/05                       |  | Community Cent Bank CD, maturity 2/17/06, interest rate @ 3.15%     |  | $                   | 99,831     |       | $ | 99,831                   |  | 0.3   | %
|100,000 |  | 8/05                       |  | Acacia Fed Savgs Bank CD, maturity 2/23/06, interest rate @ 3.15%   |  |                     | 99,807     |       |   | 99,807                   |  | 0.3   |  
|100,000 |  | 8/05                       |  | Banco Popular CD, maturity 2/23/06, interest rate @ 3.15%           |  |                     | 99,807     |       |   | 99,807                   |  | 0.3   |  
|100,000 |  | 8/05                       |  | Western Bank CD, maturity 2/24/06, interest rate @ 3.2%             |  |                     | 99,810     |       |   | 99,810                   |  | 0.3   |  
|100,000 |  | 8/05                       |  | First Fed Sav Bank CD, maturity 3/8/06, interest rate @ 3.5%        |  |                     | 99,820     |       |   | 99,820                   |  | 0.3   |  
|100,000 |  | 8/05                       |  | Merchants & Fmrs Bank CD,maturity 2/28/06, interest rate @3.15%     |  |                     | 99,788     |       |   | 99,788                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Franklin Bank CD, maturity 3/2/06, interest rate @ 3.15%            |  |                     | 99,795     |       |   | 99,795                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Sky Bank CD, maturity 3/3/06, interest rate # 3.25%                 |  |                     | 99,791     |       |   | 99,791                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Indymac Bank CD, maturity 3/9/06, interest rate @ 3.25%             |  |                     | 99,768     |       |   | 99,768                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Oriental Bank CD, maturity 3/9/06, interest rate @ 3.3%             |  |                     | 99,777     |       |   | 99,777                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Park Cities Bank CD, maturity 3/10/06, interest rate @ 3.25%        |  |                     | 99,784     |       |   | 99,784                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Wright Express Finl Serv CD, maturity 3/15/06, interest rate @ 3.5% |  |                     | 99,798     |       |   | 99,798                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | First Bank CD, maturity 3/15/06, interest rate @ 3.6%               |  |                     | 99,791     |       |   | 99,791                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Baylake Bank CD, maturity 6/23/06, interest rate @ 3.7%             |  |                     | 99,527     |       |   | 99,527                   |  | 0.2   |  
|71,000  |  | 9/05                       |  | Capital Crossing Bank CD, maturity 6/28/06, interest rate @ 3.8%    |  |                     | 70,700     |       |   | 70,700                   |  | 0.1   |  
|100,000 |  | 9/05                       |  | New Frontier Bank CD, maturity 6/28/06, interest rate @ 3.8%        |  |                     | 99,577     |       |   | 99,577                   |  | 0.2   |  
|100,000 |  | 8/05                       |  | Doral Bank CD, maturity 6/23/06, interest rate @ 3.7%               |  |                     | 99,507     |       |   | 99,507                   |  | 0.2   |  
|100,000 |  | 9/05                       |  | Union Bank CD, maturity 6/30/06, interest rate @ 3.9%               |  |                     | 99,619     |       |   | 99,619                   |  | 0.2   |  
|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  
|        |  |                            |  | Total Certificates of Deposit                                       |  | $                   | 1,766,297  |       | $ | 1,766,297                |  | 4.0   | %
|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  
|        |  |                            |  | Total Investments in U.S. Treasuries and CDs                        |  | $                   | 11,601,357 |       | $ | 11,601,357               |  | 26.1  | %
|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  
|        |  |                            |  | TOTAL INVESTMENTS                                                   |  | $                   | 43,867,694 |       | $ | 38,752,926               |  | 87.2  | %
|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  
|        |  |                            |  | Cash and other assets, less liabilities                             |  |                     |            |       |   | 5,688,192                |  | 12.8  | %
|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  
|        |  |                            |  | Net assets at December 31, 2005                                     |  |                     |            |       | $ | 44,441,118               |  | 100.0 | %
|        |  |                            |  |                                                                     |  |                     |            |       |   |                          |  |       |  

Notes to Schedule of Investments:



| |  |  | Except where otherwise noted, all of our investments listed above are in common stock of companies that are publicly traded over the counter, publicly traded on the
American Stock Exchange or publicly traded on the Canadian Venture Exchange.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The above investments with the exception of the U.S. Treasuries, certificates of deposits and UTEK Real Estate Holdings, Inc. (see (3) below) are non-income
producing. Equity investments that have not paid dividends within the last twelve months are considered non-income producing.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors. In making its determination
the Board of Directors has considered valuation appraisals provided by an independent valuation service provider. (See Notes 1 and 2 to the consolidated financial statements.)
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of December 31, 2005, all of the securities that we own are subject to legal restrictions on resale with the exception of Circle Group Holdings, Inc.,
Israel Technology Acquisition Corp., Harborlight Diversified Fund, LP and Fortress America Acquisition Corp. As a result, our ability to sell or otherwise transfer the securities we hold in our portfolio is limited.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Upon approval by the Board of Directors, management made the decision in the quarter ended September 30, 2005 to sell some of the investments that the Company
had carried on its financial statements with a zero value for several quarters. Management determined that maintaining these investments was costly and the likelihood of future value was minimal. The following assets were removed from the schedule
of investments as a result of this transaction: Provision Operation Systems, Inc., Advanced Recycling Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corp., Silver
Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks Corp. and Xeminex, Ltd.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|(1) | These are non-affiliate investments. Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of
the voting securities of the company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | These are affiliate investments. Affiliate investments are generally defined under the Investment Company Act of 1940 as companies which the Company owns at least 5% but not more
than 25% of the voting securities of the company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | This is a control investment. Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns more than 25% of the voting
securities of the Company. We own 100% of UTEK Real Estate Holdings, Inc. (UREHI), which holds three investments: Rosbon LLC, ABM of Tampa Bay, Inc., and Ybor City Group, Inc. UREHI holds 150 shares of the total shares outstanding of
Rosbon LLC and all of the outstanding shares of ABM of Tampa Bay, Inc., and Ybor City Group, Inc.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The Company invests excess cash in a number of U.S. Treasury Bills and Certificates of Deposit. These short-term investments normally have three-month to one year maturities and do
not qualify as cash or cash equivalents.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Non-U.S. company or principal place of business is outside the U.S.
|--- | -------------------------------------------------------------------

|(6) | Investment consists of a £1.25 million convertible debenture ($2,148,500 at December 31, 2005). The Company has recognized the value of the investment based upon the
fair value of the 1,984,126 common shares underlying the convertible debenture.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Non-registered investment company.
|--- | ----------------------------------

|(8) | Closed-end management investment company that has elected to be regulated as a business development company under the Investment Act of 1940.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Xethanol Corporation and Metamorphix Global are parties related through common management.
|--- | ------------------------------------------------------------------------------------------

See accompanying notes



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Significant Accounting Policies

The
Company

UTEK is a market-driven technology transfer business that assists companies in identifying and acquiring technologies.
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 potential commercial development and use. UTEKs goal is
to provide our clients an opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical centers and federal research laboratories.

UTEK seeks to achieve its investment objective by creating newly formed companies to acquire new technologies invented primarily by employees of
universities, medical centers and federal research laboratories. The Company intends to sell these newly formed companies principally to publicly traded companies and to a lesser extent to privately owned companies in tax-free stock for stock
exchanges or for cash consideration. This unique technology-transfer process is called U2B®. The shares we receive in consideration for these sales will, in the course of our business, be sold for cash or other assets. We seek to enter into such technology transfer transactions with publicly traded
companies whenever possible, as this provides us with the potential for added liquidity.

The Company is a non-diversified, closed-end
management investment company that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940 (1940 Act). The Companys strategic objective is to increase our net assets by
effectuating technology transfer transactions with companies pursuant to which we receive securities or cash as compensation for the sale of new technology rights.

Strategic Alliance Agreements

Our strategic alliances are designed to help companies enhance their new product pipeline
through the acquisition of proprietary technologies primarily from universities, medical centers and federal research laboratories. We normally receive unregistered shares of common or preferred stock or cash from companies as payment for the
services we render under our strategic alliances. All of our technology transfer transactions are completed pursuant to our strategic alliance agreements with our client companies.

Technology Transfers

To effectuate a technology transfer transaction, we will typically create a
newly formed company to acquire a new technology from a university, medical center or federal research laboratory and then sell this newly formed company to our client for securities or cash. We call this unique technology transfer process U2B®. It is our plan that the shares we receive in these
exchanges will, in the course of our business, be sold for cash or other assets. A benefit of effectuating technology transfer transactions through our U2B® investment process is that such transactions do not result in a current taxable event for us for income tax purposes. We have not acquired,
and do not currently intend to acquire a new technology from a university, medical center and federal research laboratory in connection with our U2B® process without the prior agreement of our client to subsequently acquire such new technology from us.

Principles of Consolidation

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



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



July 1999. The consolidated financial statements include the accounts of UTEK Corporation and its wholly owned subsidiaries; UTEK-Europe, Ltd. (Europe) and
UTEKipLtd. (Israel). The UTEK-EKMS, Inc. legal entity was dissolved in July 2006 and is now operating as a division of UTEK Corporation. All intercompany transactions and balances are eliminated in consolidation.

These operating subsidiaries provide comprehensive technology transfer related services to the Company and its portfolio companies. Portfolio investments
are held for the purpose of deriving investment income and future capital gains. The financial results of the Companys portfolio investments are not consolidated in the Companys financial statements.

Reclassifications

Certain reclassifications have
been made to the 2005 and 2004 balances to conform to the 2006 financial statement presentation.

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.

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 valuation service provider. 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 resale are generally valued at a discount from the market value of the securities as quoted
on the national securities exchange or national securities association.

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 available 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, and the differences could be material. Substantially all of the Companys investments owned at December 31,
2006 and December 31, 2005 (74% and 87% of net assets, respectively), are stated at fair value as determined by the Board of Directors, in the absence of readily available fair values. The Company uses the first-in, first-out (FIFO) method of
accounting for sales of its investments.

Shares of stock provided by the portfolio companies in exchange for both strategic alliance
services and technology transfers transactions are recorded at fair value on the day that the transactions are executed. The certificates are received subsequent to the transaction date.



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Accounts Receivable

The Company provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and managements evaluation of periodic aging of accounts. The Company charges off
accounts receivable against the allowance for losses when an account is deemed to be uncollectible. It is not the Companys policy to accrue interest on past due receivables. The provision for doubtful accounts and notes was approximately
$38,000 and $26,000 as of December 31, 2006 and 2005, respectively.

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 five and seven years). Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or lease term. The carrying amount of all long-lived assets is evaluated periodically to
determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted. The Company believes that no impairment of fixed assets exists at December 31, 2006 or 2005.

Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When fixed assets are sold or otherwise
disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in the statement of operations.

Goodwill and Intangible Assets

Goodwill represents the excess purchase price over the fair value of the assets acquired in
connection with the Companys acquisitions. Intangible assets represent the cost of websites, customer lists and software obtained in connection with certain of the Companys acquisitions. The Company adheres to the Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. Accordingly, goodwill is not being amortized but is subject to annual impairment tests. Intangible assets with finite lives are amortized over their estimated useful
lives.

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 are classified as Discontinued Operations, stated at the lower of the assets carrying amount or fair value and depreciation is no longer recognized.

Foreign currency translation

The Company translates the assets and liabilities of its non-U.S.
functional currency subsidiaries 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 Statement of Net Assets under the caption Foreign currency translation adjustment.



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Revenue Recognition

Sale of Technology Rights

The Company recognizes revenue from the sale of technology rights upon the exchange of the
securities of our newly formed companies for securities in the portfolio company that acquires such newly formed company and the technology held by such newly formed company. The Company records revenue based on the fair value of the consideration
received. In most cases, the consideration received for the rights is unregistered shares of common or preferred stock of the portfolio company.

Strategic Alliance Agreements

Strategic alliance services are performed pursuant to service agreements (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 portfolio company or cash. These agreements are typically cancelable with thirty days
notice.

Revenue 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.

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 Companys websites generally is
received in the form of cash and initially is deferred and subsequently recognized ratably over the term of the subscription.

Acquisition of Technology
Rights

The direct costs associated with the Companys technology transfers are recorded as acquisition of technology
rights within expenses on the accompanying statements of operations and may include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and
sponsored research fees with the university or research facility transferring the technologies.

Stock-Based Compensation

At December 31, 2006, the Company had two stock-based equity compensation plans, which are described more fully in Note 9.

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R) (SFAS
123(R)), Share-Based Payment. Prior to the adoption of SFAS 123(R), we accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25, Accounting for Stock Issued to Employees, and
accordingly, recognized no compensation expense for stock option grants.

Under the modified prospective approach, SFAS 123(R) applies to
new awards granted subsequent to the date of adoption, January 1, 2006. Compensation cost recognized during the year ended December 31, 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of
January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share based payments granted subsequent to January 1, 2006, based on the grant date



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



fair value estimated in accordance with the provisions of SFAS 123(R). For equity awards granted after the date of adoption, the Company amortizes
share-based compensation expense on a straight-line basis over the vesting term. Compensation expense is recognized only for share-based payments expected to vest. The Company estimates forfeitures, both at the date of grant as well as throughout
the vesting period, based on the Companys historical experience and future expectations. Prior periods were not restated to reflect the impact of adopting the new standard and there is no cumulative effect.

Income Taxes

Deferred taxes are provided on the
asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.

For federal and state income tax purposes, we are taxed at regular corporate rates on
ordinary income and recognize gains on distributions of appreciated property. We are not entitled to the special tax treatment available to BDCs that elect to be treated as regulated investment companies under the Internal Revenue Code because,
among other reasons, we do not distribute at least 90% of investment company taxable income as required by the Internal Revenue Code for such treatment.

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

Realized
gains or losses are measured by the difference between the net proceeds from the repayment or sale and the original cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized. The original cost basis
of the securities we receive in connection with our strategic alliance agreements and technology transfers is equal to the amount of revenue we recognized upon the receipt of such securities. Net change in unrealized appreciation or depreciation of
investments reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Per Share Data

Basic Per Share Data is computed on
the basis of the weighted average number of shares of common stock outstanding during the year. Diluted Per Share Data is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common
shares outstanding during the period using the treasury stock method. Dilutive potential common shares consist of outstanding stock options.

Components of basic and diluted Per Share Data are as follows:



|                                                               |  |           |  |           |  |          
|-------------------------------------------------------------- |  | --------- |  | --------- |  | ---------
|                                                               |  | 2006      |  | 2005      |  | 2004     
|Weighted average outstanding shares of common stock            |  | 8,786,605 |  | 7,194,212 |  | 5,487,629
|Dilutive effect of stock options                               |  |          |  | 131,100   |  | 610,908  
|                                                               |  |           |  |           |  |          
|Common stock and common stock equivalents                      |  | 8,786,605 |  | 7,325,312 |  | 6,098,537
|                                                               |  |           |  |           |  |          
|Shares excluded from calculation of diluted Per share data (1) |  | 582,050   |  | 117,500   |  | 90,000   
|                                                               |  |           |  |           |  |          

---

|(1) | These shares attributable to outstanding stock options were excluded from the calculation of diluted Per share data because their inclusion would have been anti-dilutive. The shares
excluded from the calculation for the year ended December 31, 2006 would have been anti-dilutive because there was a net decrease in net assets from operations during the period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Dividends to Shareholders

Dividends to shareholders are recorded on the date of declaration.

Financial Instruments and Concentrations of Credit
Risk

The Companys financial instruments consist of investments, cash and cash equivalents, accounts receivable, accounts payable
and accrued expenses. The fair value of trade accounts receivable and payable and certain accrued expenses approximate their carrying amounts in the financial statements due to the short maturity of such instruments. The fair value of U.S.
Treasuries and certificates of deposit is recorded based upon their market value.

Financial instruments with significant credit risk
include investments and cash and cash equivalents. The Company invests its cash and cash equivalents and its U.S. Treasuries and certificates of deposit with high credit quality financial institutions. Such investments were in excess of FDIC
insurance limits. The Company has not experienced any losses on such accounts.

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. The most significant estimates relate to the valuation of the investment portfolio and the recognition of revenue in connection with the
receipt of unregistered securities pursuant to strategic alliance agreements and technology transfers. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board issued Interpretation
No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement
No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to materially impact
its financial position or results of operations.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and
establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of SFAS 157 to materially impact its financial
position or results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Current Year Misstatements. SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a



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balance sheet (iron curtain) approach in assessing materiality and provides a one-time cumulative effect transition adjustment. SAB No. 108 is effective
for our 2006 annual financial statements. The adoption of SAB No. 108 in 2006 did not have a material impact on the consolidated financial statements.

2. Investments

Investments at December 31, 2006 and December 31, 2005 (74% and 87% 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 valuation service provider, in the absence of readily available 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 material.

The 1940 Act prohibits the Company from acquiring (i) more than
3% of the total outstanding shares of another investment company; (ii) shares of another investment company having an aggregate value in excess of 5% of the value of the Companys total assets; or (iii) shares of another registered
investment company and all other investment companies having an aggregate value in excess of 10% of the value of the Companys total assets. Subsequent to the Companys acquisition of shares of common stock in HydroFlo, Inc., the Company
became aware that HydroFlo, Inc. was a closed-end management investment company that had elected to be treated as a BDC under the 1940 Act. Because the Companys ownership of HydroFlo, Inc. exceeded certain of the limits set forth above, the
Company made a gift of 5,100,000 shares of HydroFlo, Inc.s common stock to certain nonprofit organizations during the year ended December 31, 2006. The fair market value of such shares immediately prior to such gift was approximately
$663,000. As a result, the Company recorded an expense in the amount of $663,000, which is included in general and administrative expenses in the accompanying statement of operations for the year ended December 31, 2006.

The Company also elected to abandon its right, title and interest in and to 400,000 shares of common stock of HydroFlo, Inc. because HydroFlo, Inc. may
have issued such shares in violation of the 1940 Act. Such shares were originally issued by HydroFlo, Inc. to the Company pursuant to a strategic alliance agreement. Such action resulted in the Companys recognition of a $7,000 capital loss,
net of income tax, during the year ended December 31, 2006.

On September 30, 2005, the Company entered into an agreement and
plan of acquisition with Ybor City Group, Inc. to acquire all of its issued and outstanding shares of capital stock for an aggregate purchase price of $3,150,000. Ybor City Group is a real estate holding company that owns a commercial real estate
property in Tampa, Florida. UTEK financed the acquisition through the issuance of 119,134 shares of its common stock and a $1,500,000 mortgage. Ybor City Group, Inc. and the associated mortgage entered into by Ybor City Group, Inc. are included
within UTEK Real Estate Holdings, Inc. within the Companys portfolio investments.

During September 2005, upon approval by the Board
of Directors, management made the decision to sell some of the investments that the Company had carried on its financial statements with a zero value for several quarters. Maintaining these investments was costly and the likelihood of future value
was minimal. The following investments were included in the group of zero value shares: Provision Operation Systems, Inc.,



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Advanced Recycling Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding
Corporation, Silver Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks Corporation, and Xeminex, Ltd.

Strategic Alliances:

During the year ended December 31, 2006, we entered into forty-four
strategic alliance agreements. Of these, fifteen were terminated during the year ended December 31, 2006 and two were terminated subsequent to December 31, 2006. As a result of these agreements, the fair value of the Companys assets
increased by $2.7 million for the year ended December 31, 2006. The income recognized from all strategic alliance agreements for the year ended December 31, 2006 was approximately $2.2 million. At December 31, 2006, the Company had
twenty-six active strategic alliance clients.

During the year ended December 31, 2005, we entered into thirty-six strategic alliance
agreements, of which, four were subsequently terminated in 2005 and four were terminated in 2006. As a result of these agreements, the fair value of the Companys assets increased by $1.6 million at December 31, 2005. The income recognized
from all strategic alliance agreements for the year ended December 31, 2005 was approximately $1.4 million.

During the year ended
December 31, 2004, we entered into seventeen strategic alliance agreements, of which, two were subsequently terminated in 2005. As a result of these agreements, the fair value of the Companys assets increased by $1.2 million at
December 31, 2004. The income recognized from all strategic alliance agreements for the year ended December 31, 2004 was approximately $1.0 million.

Technology Transfers:

All of our technology transfers are generally completed according to our strategic alliance service
agreements with our clients. During the year ended December 31, 2006, we completed the following twenty-nine technology transfers:



|           |  |                                                   |  |                                        |  |                                   |  |                    |       
|---------- |  | ------------------------------------------------- |  | -------------------------------------- |  | --------------------------------- |  | ------------------ | ------
|Date       |  | Name of Company Acquiringthe Newly Formed Company |  | Newly Formed Company                   |  | Consideration UnregisteredShares |  | Price perShare (1)
|January 20 |  | Fuel FX International, Inc.                       |  | Emissions-Detection Technologies, Inc. |  | 100,000(2)                        |  | $                  | 21.000
|January 27 |  | Broadcast International, Inc.                     |  | Video Processing Technologies, Inc.    |  | 944,360                           |  |                    | 1.210 
|January 30 |  | WebSky, Inc.                                      |  | Strategic Wireless Solutions, Inc.     |  | 33,250,000                        |  |                    | 0.027 
|March 6    |  | Trio Industries Group, Inc.                       |  | Ultra Fine Coating Systems, Inc.       |  | 1,805,000                         |  |                    | 1.350 
|March 15   |  | American Soil Technologies, Inc.                  |  | Advanced Fertilizer Technologies, Inc. |  | 4,275,000                         |  |                    | 0.0367
|March 16   |  | Advanced Refractive Technologies, Inc.            |  | Ocular Therapeutics, Inc.              |  | 97,000(3)                         |  |                    | 21.300
|April 3    |  | Trio Industries Group, Inc.                       |  | Natural Adhesive Technologies, Inc.    |  | 1,566,089                         |  |                    | 2.090 
|April 4    |  | Advanced Refractive Technologies, Inc.            |  | Advanced Glaucoma Technologies, Inc.   |  | 100,000(4)                        |  |                    | 19.960



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|             |  |                                                   |  |                                                  |  |                                   |  |                   
|------------ |  | ------------------------------------------------- |  | ------------------------------------------------ |  | --------------------------------- |  | ------------------
|Date         |  | Name of Company Acquiringthe Newly Formed Company |  | Newly Formed Company                             |  | Consideration UnregisteredShares |  | Price perShare (1)
|April 5      |  | UBA Technology, Inc.                              |  | Intellitouch Technologies, Inc.                  |  | 48,614,797(5)                     |  | 0.034             
|May 1        |  | Industrial Biotechnology Corp.                    |  | Bio-Repellant Technologies, Inc.                 |  | 3,865,979                         |  | 0.720             
|May 12       |  | Kwikpower International Plc                       |  | Hydrocarbon Synthesis Technologies, Inc.         |  | (6)                               |  |                   
|May 12       |  | Kwikpower International Plc                       |  | Advanced BioEnergy Technologies, Inc.            |  | (7)                               |  |                   
|June 1       |  | Trio Industries Group, Inc.                       |  | Advanced Powder Coating Technologies, Inc.       |  | 1,470,987                         |  | 1.770             
|June 12      |  | Kwikpower International Plc                       |  | Advanced Biofuel Technologies, Inc.              |  | (8)                               |  |                   
|June 13      |  | Xethanol Corporation                              |  | Advanced Biomass Gasification Technologies, Inc. |  | 136,838                           |  | 6.400             
|June 20      |  | Klegg Electronics, Inc.                           |  | Smart Speaker Technologies, Inc.                 |  | 22,941,327                        |  | 0.104             
|July 12      |  | Avalon Oil & Gas, Inc.                            |  | Ultrasonic Mitigation Technologies, Inc.         |  | 15,437,500                        |  | 0.082             
|July 14      |  | DME Interactive Holdings, Inc.                    |  | Multimedia Control Technologies, Inc.            |  | 4,426,136                         |  | 0.170             
|July 18      |  | Cytodyn, Inc.                                     |  | Advanced Influenza Technologies, Inc.            |  | 2,000,000                         |  | 1.780             
|August 11    |  | NetFabric Holdings, Inc                           |  | Intrusion Detection Technologies, Inc.           |  | 7,125,000                         |  | 0.083             
|August 18    |  | Material Technologies, Inc.                       |  | Materials Monitoring Technologies, Inc.          |  | 35,749,213                        |  | 0.047             
|August 29    |  | Industrial Biotechnology Corp.                    |  | Advanced Pheromone Technologies, Inc.            |  | 4,642,857                         |  | 0.290             
|September 12 |  | Liberty Diversified Holdings, Inc.                |  | Innovative Packaging Technologies, Inc.          |  | 15,437,500                        |  | 0.076             
|September 22 |  | Advanced Medical Isotope Corp.                    |  | Neu-Hope Technologies, Inc.                      |  | 95,000(9)                         |  | 18.983            
|October 9    |  | World Energy Solutions, Inc.                      |  | Pure Air Technologies, Inc.                      |  | 100,000(10)                       |  | 26.325            
|November 1   |  | Klegg Electronics, Inc.                           |  | Universal Wireless Technologies, Inc.            |  | 28,771,428                        |  | 0.0469            
|November 8   |  | Avalon Oil & Gas, Inc.                            |  | IntelliWell Technologies, Inc.                   |  | 19,000,000                        |  | 0.0335            
|November 10  |  | Cyberlux Corporation                              |  | SPE Technologies, Inc.                           |  | 98,000                            |  | 16.380            
|December 6   |  | Cargo Connection Logistics Holding, Inc.          |  | Nuclear Material Detection Technologies, Inc.    |  | 168,539,326                       |  | 0.00596           

During the year ended December 31, 2005, we completed the following fourteen technology
transfers:



|            |  |                                                   |  |                                           |  |                                   |  |                    |      
|----------- |  | ------------------------------------------------- |  | ----------------------------------------- |  | --------------------------------- |  | ------------------ | -----
|Date        |  | Name of Company Acquiringthe Newly Formed Company |  | Newly Formed Company                      |  | Consideration UnregisteredShares |  | Price perShare (1)
|January 10  |  | Xethanol Corp.                                    |  | Superior Separation Technologies, Inc.    |  | 250,000                           |  | $                  | 2.500
|February 22 |  | Health Sciences Group, Inc.                       |  | Open Cell Biotechnologies, Inc.           |  | 822,845                           |  |                    | 0.730
|March 31    |  | Swiss Medica, Inc.                                |  | Anti Depression Biohealth Solutions, Inc. |  | 1,862,069(11)                     |  |                    | 0.190



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|             |  |                                                   |  |                                            |  |                                   |  |                   
|------------ |  | ------------------------------------------------- |  | ------------------------------------------ |  | --------------------------------- |  | ------------------
|Date         |  | Name of Company Acquiringthe Newly Formed Company |  | Newly Formed Company                       |  | Consideration UnregisteredShares |  | Price perShare (1)
|June 30      |  | Manakoa Services Corp.                            |  | Vigilant Network Technologies, Inc.        |  | 5,365,854                         |  | 0.280             
|July 18      |  | eLinear Corp.                                     |  | Secure Voice Communications, Inc.          |  | 150,528                           |  | 0.690             
|August 5     |  | Industrial Biotechnology Corp.                    |  | Advanced Bioscience, Inc.                  |  | Preferred A 10,000,000            |  | 0.200             
|August 15    |  | Xethanol Corp.                                    |  | Xylose Technologies, Inc.                  |  | 567,857                           |  | 3.020             
|September 1  |  | Fuel FX International Inc.                        |  | Emissions-Reduction Technologies, Inc.     |  | 5,715,000                         |  | 0.200             
|September 15 |  | Inseq Corp.                                       |  | Separation and Recovery Technologies, Inc. |  | 434,782,608                       |  | 0.0056            
|September 30 |  | Kwikpower International, PLC                      |  | Biodiesel Technologies, Inc.               |  | (12)                              |  | 2.500             
|October 3    |  | Trio Industries                                   |  | Kenaf Core Technologies, Inc.              |  | 1,153,178                         |  | 1.230             
|October 12   |  | Fuel FX Internaitional, Inc.                      |  | Emissions Analysis, Inc.                   |  | 3,500,000                         |  | 0.200             
|November 17  |  | Trio Industries, Inc.                             |  | Cornboard Technologies, Inc.               |  | 1,643,500                         |  | 1.530             
|December 13  |  | Advanced Refractive Technologies, Inc.            |  | Optimetrix Technologies, Inc.              |  | Preferred B 97,000                |  | 10.650            

During the year ended December 31, 2004, we completed the following ten technology transfers:



|             |  |                                                   |  |                                        |  |                                   |  |                    |      
|------------ |  | ------------------------------------------------- |  | -------------------------------------- |  | --------------------------------- |  | ------------------ | -----
|Date         |  | Name of Company Acquiringthe Newly Formed Company |  | Newly Formed Company                   |  | Consideration UnregisteredShares |  | Price perShare (1)
|April 30     |  | Zkid Network Company                              |  | Web Safe Technologies, Inc.            |  | 9,550,000                         |  | $                  | 0.110
|June 25      |  | Xethanol Corp.                                    |  | Advanced Bioethanol Technologies, Inc. |  | 200,000                           |  |                    | 2.500
|August 2     |  | HydroFlo, Inc.                                    |  | Arsenic Removal Technologies, Inc.     |  | 2,823,529                         |  |                    | 0.140
|August 5     |  | Manakoa Services Company                          |  | Advanced Cyber Security, Inc.          |  | 2,000,000                         |  |                    | 0.270
|August 10    |  | Power3 Medical Products, Inc.                     |  | Ice Technologies, Inc.                 |  | 141,000                           |  |                    | 1.380
|September 30 |  | Xethanol Corp.                                    |  | Ethanol Extraction Technologies, Inc.  |  | 169,230                           |  |                    | 2.500
|October 25   |  | Health Sciences Group, Inc.                       |  | Polymann Technologies, Inc.            |  | 1,160,000                         |  |                    | 0.460
|October 25   |  | Health Sciences Group, Inc.                       |  | Apple Peel Technologies, Inc.          |  | 1,200,000                         |  |                    | 0.460
|December 17  |  | Bioflavorance Technology & Research,
Inc.         |  | Advanced Flavors and Fragrances, Inc.  |  | (13)                              |  |                    | 0.000
|December 17  |  | Hydroflo, Inc.                                    |  | Safety Scan Technology, Inc.           |  | 3,485,000                         |  |                    | 0.130

---

|* | Unless otherwise noted, the Company received unregistered shares of common stock of the company acquiring the Companys newly formed company.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(1) | Represents the valuation price per share at the date of acquisition.
|--- | --------------------------------------------------------------------

|(2) | Preferred B shares convertible into common shares based on a value of $2.1 million.
|--- | -----------------------------------------------------------------------------------

|(3) | Preferred C shares convertible into common shares based on a value of $2.8 million.
|--- | -----------------------------------------------------------------------------------

|(4) | Preferred D shares convertible into common shares based on a value of $2.0 million.
|--- | -----------------------------------------------------------------------------------

|(5) | The Company also received 95,000 Preferred A shares convertible into common shares based on a value of $2.5 million.
|--- | --------------------------------------------------------------------------------------------------------------------



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|(6) | Consideration consisted of a £1.2 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 2.4 million
common shares underlying the convertible debenture.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Consideration consisted of a £1.3 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 2.5 million
common shares underlying the convertible debenture.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Consideration consisted of a £1.2 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 2.3 million
common shares underlying the convertible debenture.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | 5% Preferred A shares convertible into common shares based on a value of $3,182,500.
|--- | ------------------------------------------------------------------------------------

|(10) | Preferred A shares convertible into common shares based on a value of $4,050,000 million
|---- | ----------------------------------------------------------------------------------------

|(11) | The Company also received $96,637 in cash.
|---- | ------------------------------------------

|(12) | Consideration consisted of a £1.25 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 1,984,126 common
shares underlying the convertible debenture.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | The Company was to receive 500,000 shares of Bioflavorance Technology & Research, Inc., 20,000,000 shares of Uniphyd Corporation and 175,000 shares of Sinofresh, Inc. These
shares were subsequently exchanged for 3,000,000 shares of Industrial Biotechnology Corp.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On August 2, 2004, the
Company assisted Shriners Hospitals for Children in transferring a tendon replacement technology they had developed and patented to Crystal Point Partners. As consideration for the services it rendered in connection with the transfer, the Company
received 50% of the upfront consideration from the license agreement with Shriners Hospitals for Children and Myrmidon Biomaterials, Inc., including 100,000 unregistered shares of common stock from Myrmidon Biomaterials, Inc. During 2006, with
approval by the Board of Directors, management determined that the investment in Myrmidon Biomaterials, Inc. was permanently impaired. The Company has written off the investment.

3. Fixed Assets

Fixed assets consist of the following:



|                               |  |              |          |   |      |   |          |  
|------------------------------ |  | ------------ | -------- | - | ---- | - | -------- | -
|                               |  | December 31, |         
|                               |  | 2006         |          |   | 2005 |  
|Computer Equipment             |  | $            | 456,149  |   |      | $ | 255,628  |  
|Furniture and Fixtures         |  |              | 350,655  |   |      |   | 172,185  |  
|Leasehold Improvements         |  |              | 5,017    |   |      |   | 38,762   |  
|                               |  |              |          |   |      |   |          |  
|                               |  |              | 811,821  |   |      |   | 466,575  |  
|Less: Accumulated Depreciation |  |              | (216,820 | ) |      |   | (155,472 | )
|                               |  |              |          |   |      |   |          |  
|                               |  | $            | 595,001  |   |      | $ | 311,103  |  
|                               |  |              |          |   |      |   |          |  

Depreciation expense was approximately $122,000, $43,000, and $30,000 for the years ended
December 31, 2006, 2005, and 2004 respectively.

4. Goodwill

The Company decided during 2006 to make significant changes in strategy for UTEKip, Ltd., primarily switching the focus of operations in Israel from software to technology transfer, the Companys core
business.



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These changes were other-than-temporary; therefore management determined there was an impairment of the original purchase goodwill. The Company recorded a
total impairment of the goodwill for UTEKip (Israel segment) in 2006. Based on an analysis of the undiscounted cash flows, the company determined that the goodwill for this reporting unit was impaired. This resulted in a write-down of
approximately $235,000, $147,000 after tax, which is an operating expense in the statement of operations for the year ended December 31, 2006.

The carrying amount of goodwill is summarized in the following table:



|                             |  |              |           |      |   |           |  
|---------------------------- |  | ------------ | --------- | ---- | - | --------- | -
|                             |  | December 31, |          
|                             |  | 2006         |           | 2005 |  
|UTEK-Europe, Ltd.            |  | $            | 562,501   |      | $ | 562,501   |  
|UTEK-EKMS, Inc.              |  |              | 426,869   |      |   | 426,869   |  
|Pharma-Transfer, Ltd.        |  |              | 528,553   |      |   | 528,553   |  
|UTEKip, Inc.                 |  |              |          |      |   | 234,400   |  
|Knowledge Express            |  |              | 1,488,110 |      |   | 1,488,110 |  
|Currency exchange adjustment |  |              | 15,130    |      |   | (112,294  | )
|                             |  |              |           |      |   |           |  
|                             |  | $            | 3,021,163 |      | $ | 3,128,139 |  
|                             |  |              |           |      |   |           |  

5. Intangible Assets

During 2006, the Company decided to make significant changes in strategy for UTEKip, Ltd., primarily switching the focus of operations in Israel from software to technology transfer, the Companys core
business. In connection therewith, the Company ceased operation of the UTEKip website as of December 31, 2006 and wrote-off the remaining carrying value of the related intangible asset. This resulted in an impairment charge of
approximately $51,000, $32,000 after tax, which is included in general and administrative expenses in the statement of operations (Israel segment) for the year ended December 31, 2006.

The Company ceased operation of the UTEK-EKMS website during 2006 as a result of duplication of website contents with other UTEK websites. The Company
wrote-off the remaining carrying value of the related intangible asset. This resulted in an impairment charge of approximately $16,000, $9,000 after tax, which is included in general and administrative expenses in the statement of operations (United
States segment) for the year ended December 31, 2006. The Company believes that no additional impairment of intangible assets exists at December 31, 2006.

The carrying amount of intangible assets is summarized in the following table:



|                                                   |  |              |          |   |      |   |          |  
|-------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                   |  | December 31, |         
|                                                   |  | 2006         |          |   | 2005 |  
|Tech-Ex website                                    |  | $            | 70,900   |   |      | $ | 70,900   |  
|Uventures website                                  |  |              | 40,000   |   |      |   | 40,000   |  
|Pharma-Transfer website                            |  |              | 112,195  |   |      |   | 112,195  |  
|UTEKip website                                     |  |              |         |   |      |   | 75,000   |  
|UTEK-EKMS website                                  |  |              |         |   |      |   | 25,000   |  
|Knowledge Express customer list/website/trademarks |  |              | 150,000  |   |      |   | 150,000  |  
|                                                   |  |              |          |   |      |   |          |  
|                                                   |  |              | 373,095  |   |      |   | 473,095  |  
|Less: Accumulated amortization                     |  |              | (182,995 | ) |      |   | (129,946 | )
|                                                   |  |              |          |   |      |   |          |  
|                                                   |  | $            | 190,100  |   |      | $ | 343,149  |  
|                                                   |  |              |          |   |      |   |          |  



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Intangible assets are being amortized over the estimated useful lives of the respective assets of
five years. Amortization expense related to intangible assets was approximately $90,000, $80,000 and $23,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The estimated aggregate amortization expense for intangible assets
for the years 2007, 2008, 2009 and 2010 will be approximately $66,000, $59,000, $50,000 and $15,000, respectively.

6. Note Payable

In January 2004, the Company repaid $880,000 due on a $1,000,000 loan by issuing 125,715 shares of our common shares to the lender. The shares were issued
at an effective value of $7.00 per share. The Company recognized $32,000 of interest expense within general and administrative expenses on the accompanying 2004 statement of operations.

7. Income Taxes

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

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,
|          |  | 2006                    |            | 2005 |   | 2004     
|Current:  |  |                         |            |      |   |           |  |   |        
|Federal   |  | $                       |           |      | $ |          |  | $ |       
|State     |  |                         |           |      |   |          |  |   |       
|Foreign   |  |                         |           |      |   |          |  |   |       
|          |  |                         |            |      |   |           |  |   |        
|          |  | $                       |           |      | $ |          |  | $ |       
|          |  |                         |            |      |   |           |  |   |        
|Deferred: |  |                         |            |      |   |           |  |   |        
|Federal   |  | $                       | 10,935,888 |      | $ | 3,226,692 |  | $ | 530,196
|State     |  |                         | 1,149,049  |      |   | 337,535   |  |   | 56,604 
|          |  |                         |            |      |   |           |  |   |        
|          |  |                         | 12,084,937 |      |   | 3,564,227 |  |   | 586,800
|          |  |                         |            |      |   |           |  |   |        
|          |  | $                       | 12,084,937 |      | $ | 3,564,227 |  | $ | 586,800
|          |  |                         |            |      |   |           |  |   |        

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



|                                    |  |                         |            |      |   |           |  |   |        
|----------------------------------- |  | ----------------------- | ---------- | ---- | - | --------- |  | - | -------
|                                    |  | Year Ended December 31,
|                                    |  | 2006                    |            | 2005 |   | 2004     
|Tax at U.S. statutory rate          |  | $                       | 10,889,909 |      | $ | 3,213,699 |  | $ | 520,037
|State taxes, net of federal benefit |  |                         | 1,162,658  |      |   | 337,535   |  |   | 56,604 
|Other                               |  |                         | 32,370     |      |   | 12,993    |  |   | 10,159 
|                                    |  |                         |            |      |   |           |  |   |        
|                                    |  | $                       | 12,084,937 |      | $ | 3,564,227 |  | $ | 586,800
|                                    |  |                         |            |      |   |           |  |   |        



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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



|                                   |  |                    |            |   |      |   |             |  
|---------------------------------- |  | ------------------ | ---------- | - | ---- | - | ----------- | -
|                                   |  | As of December 31, |           
|                                   |  | 2006               |            |   | 2005 |  
|Net operating loss carryforward    |  | $                  | 3,107,826  |   |      | $ | 2,806,594   |  
|Tax credit carryforward            |  |                    |           |   |      |   |            |  
|Other                              |  |                    | (15,375    | ) |      |   | 2,690       |  
|Investments                        |  |                    | (2,331,651 | ) |      |   | (5,400,121  | )
|                                   |  |                    |            |   |      |   |             |  
|Net deferred tax asset (liability) |  | $                  | 760,800    |   |      |   | ($2,590,837 | )
|                                   |  |                    |            |   |      |   |             |  

SFAS 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 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, 2006 and 2005.

At December 31, 2006, the Company had available U.S. net operating
loss carry-forwards of approximately $6,560,000 which expire as follows: 2021 - $707,000; 2022 - $372,000; 2023 - $1,645,000; and 2025 - $3,836,000.

8.
Stockholders Equity

Transactions in common stock for the three years ended December 31, 2006, were as follows:



|                                                         |  |           |  |           |        |                 |   |            |  
|-------------------------------------------------------- |  | --------- |  | --------- | ------ | --------------- | - | ---------- | -
|Common Stock                                             |  | Shares    |  | Par Value |        | Paid-In Capital |  
|Balance at December 31, 2003                             |  | 4,790,550 |  | $         | 47,906 |                 | $ | 10,943,549 |  
|                                                         |  |           |  |           |        |                 |   |            |  
|Employee stock options exercised                         |  | 142,500   |  |           | 1,425  |                 |   | 1,016,450  |  
|Warrants exercised                                       |  | 15,681    |  |           | 157    |                 |   | (157       | )
|Loan repayment                                           |  | 125,715   |  |           | 1,257  |                 |   | 832,633    |  
|Private placementJanuary 2004                           |  | 407,986   |  |           | 4,080  |                 |   | 2,566,232  |  
|Private placementApril 2004                             |  | 100,000   |  |           | 1,000  |                 |   | 899,000    |  
|Exempt offeringSeptember 2004                           |  | 350,000   |  |           | 3,500  |                 |   | 3,667,242  |  
|Acquisition of UTEK-EKMS, Inc                            |  | 20,605    |  |           | 206    |                 |   | 299,794    |  
|Acquisition of Pharma-Transfer, Ltd                      |  | 29,592    |  |           | 296    |                 |   | 434,704    |  
|Acquisition of ABM of Tampa Bay, Inc                     |  | 20,534    |  |           | 205    |                 |   | 299,795    |  
|                                                         |  |           |  |           |        |                 |   |            |  
|Balance at December 31, 2004                             |  | 6,003,163 |  | $         | 60,032 |                 | $ | 20,959,242 |  
|                                                         |  |           |  |           |        |                 |   |            |  
|Employee stock options exercised                         |  | 246,750   |  |           | 2,468  |                 |   | 1,660,832  |  
|Warrants exercised                                       |  | 16,993    |  |           | 170    |                 |   | (170       | )
|Acquisition of UTEKip, Ltd                               |  | 19,895    |  |           | 199    |                 |   | 299,801    |  
|Acquisition of Ybor City Group, Inc.                     |  | 119,134   |  |           | 1,191  |                 |   | 1,648,809  |  
|AIM Listing                                              |  | 1,224,610 |  |           | 12,246 |                 |   | 12,461,671 |  
|Private PlacementAugust 2005                            |  | 330,960   |  |           | 3,310  |                 |   | 3,317,478  |  
|                                                         |  |           |  |           |        |                 |   |            |  
|Balance at December 31, 2005                             |  | 7,961,505 |  | $         | 79,616 |                 | $ | 40,347,663 |  
|                                                         |  |           |  |           |        |                 |   |            |  
|Stock-based compensation expense                         |  |          |  |           |       |                 |   | 504,589    |  
|Deferred tax related to stock-based compensation expense |  |          |  |           |       |                 |   | 440,616    |  
|Employee stock options exercised                         |  | 75,255    |  |           | 753    |                 |   | 754,764    |  
|Private placementFebruary 2006                          |  | 816,330   |  |           | 8,163  |                 |   | 8,947,019  |  
|Acquisition of 22ndStreet of Ybor City, Inc.             |  | 82,919    |  |           | 829    |                 |   | 999,171    |  
|                                                         |  |           |  |           |        |                 |   |            |  
|Balance at December 31, 2006                             |  | 8,936,009 |  | $         | 89,361 |                 | $ | 51,993,822 |  
|                                                         |  |           |  |           |        |                 |   |            |  



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On April 11, 2005, the Company sold 1,224,610 shares of its common stock to certain
institutional and other investors located outside the United States for net proceeds of approximately $12.5 million. In connection with this offering, the Company listed its shares of common stock for trading on the AIM market of the London Stock
Exchange under the symbol UTKA.

On February 8, 2006, the Company consummated a financing which raised approximately $10
million (before expenses) from the sale of 816,330 shares of common stock. Piper Jaffray, & Co. received an aggregate commission of $702,000.

On March 30, 2006, the Company declared a dividend of $0.02 per share to stockholders of record as of April 28, 2006. The dividend was paid on May 19, 2006. The Company also declared a dividend of $0.02
per share to stockholders of record as of January 8, 2007. This dividend was paid on January 31, 2007.

See Note 9 for further
information on stock-based compensation expense and employee stock options exercised. See Note 11 for further information on acquisitions.

9. Stock
Compensation, Stock Options and Warrants

The Company had two stock-based equity compensation plans at December 31, 2006. The
Company adopted a 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, as amended, the Company is authorized to issue
options to purchase up to 1,385,000 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, as amended, that do not qualify for incentive treatment under the Code. Under the terms of the 2000 Plan, the Company is authorized to issue options to purchase up to 315,000 shares of the Companys common stock.
Under the 2000 Plan, as amended, the Company may only issue options that do not qualify for incentive treatment under Section 422 of the Code. Options, under both plans, are granted at the fair market value of the stock on the date of grant,
except in the case of a more than 10% shareholder for which grants are exercisable at 110% of fair market value of the stock on the date of grant. Options generally become fully vested three to four years from the date of grant and expire five years
from the date of grant. At December 31, 2006, the Company had 593,445 shares available for future stock option grants under existing plans.

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), (SFAS 123(R)) Share-Based Payment. Prior to the adoption of SFAS 123(R), we accounted for
stock option grants using the intrinsic value method prescribed in APB Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly, recognized no compensation expense for stock option grants.

Under the modified prospective approach, SFAS 123(R) applies to new awards granted subsequent to the date of adoption, January 1, 2006. Compensation
cost recognized during the year ended December 31, 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123, and compensation cost for all share based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Prior periods were not
restated to reflect the impact of adopting the new standard and there is no cumulative effect.

The following table illustrates the impact
SFAS 123(R) has had on our net increase (decrease) in net assets from operations (net earnings (loss)) and related per share information for the year ended December 31, 2006 and



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



the pro forma effects on our net increase in net assets from operations (net earnings) and related per share information (earnings (loss) per share) for the
years ended December 31, 2005 and 2004 had SFAS 123(R) been in effect in 2005 and 2004.



|                                                                        |  |             |   |  |      |           |      |   |          
|----------------------------------------------------------------------- |  | ----------- | - |  | ---- | --------- | ---- | - | ---------
|                                                                        |  | 2006        |   |  | 2005 |           | 2004
|Net increase (decrease) in net asset, as reported                       |  | (4,910,798  | ) |  | $    | 2,095,675 |      | $ | 2,260,084
|Increase (decrease) in net asset per share, as reported                 |  |             |   |  |      |           |      |   |          
|Basic                                                                   |  | ($0.56      | ) |  | $    | 0.29      |      | $ | 0.41     
|Diluted                                                                 |  | ($0.56      | ) |  | $    | 0.29      |      | $ | 0.37     
|Compensation expense per SFAS 123, net of related tax effect*           |  | 476,432     |   |  |      |          |      |   |         
|Pro forma effects                                                       |  |             |   |  |      |           |      |   |          
|Pro forma compensation expense per SFAS 123, net of related tax effect* |  |            |   |  |      | 310,472   |      |   | 246,244  
|Net increase (decrease) in net asset, pro forma                         |  | ($4,434,366 | ) |  | $    | 1,785,203 |      | $ | 2,013,840
|Increase (decrease) in net asset per share, pro forma                   |  |             |   |  |      |           |      |   |          
|Basic                                                                   |  | ($0.50      | ) |  | $    | 0.25      |      | $ | 0.37     
|Diluted                                                                 |  | ($0.50      | ) |  | $    | 0.24      |      | $ | 0.33     

---

|* | Tax effect pertains only to certain non-qualified stock options.
|- | ----------------------------------------------------------------

The impact of SFAS 123(R) on cash used in operations was an increase of approximately $505,000 as of December 31, 2006. There was no impact on cash flow from investing or financing activities for 2006.

During the first three quarters of 2006, the Company segregated stock-based compensation expense into salaries and wages, sales and marketing, and
general and administrative in the consolidated statements of operations. During the fourth quarter of 2006, the Company reclassified all stock-based compensation expense for the year into salaries and wages. As a result, stock-based compensation for
the year ended December 31, 2006 is included in salaries and wages in the accompanying consolidated statements of operations.

We use
the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant. The assumptions employed in the calculation of the fair value of share-based compensation expense for the year ended December 31, 2006
were calculated as follows:



| |  |  | Expected dividend yieldbased on the Companys historical dividend yield.
| | - |  | -------------------------------------------------------------------------



| |  |  | Expected volatilitybased on the Companys historical market price at consistent points in a period equal to the expected life of the options.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Risk-free interest ratebased on the U.S. Treasury yield curve in effect at the time of grant.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Expected life of optionscalculated using the simplified method as prescribed in Staff Accounting Bulletin No. 107, where the expected life is equal to
the sum of the vesting period and the contractual term divided by two.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the assumptions
used to estimate the fair value of stock options granted during the years ended December 31, 2006, 2005 and 2004.



|                                       |  |      |                |   |      |   |               |      |  |   |           |  
|-------------------------------------- |  | ---- | -------------- | - | ---- | - | ------------- | ---- |  | - | --------- | -
|                                       |  | 2006 |                |   | 2005 |   |               | 2004 | 
|Expected dividend yield                |  |      | 0-0.12         | % |      |   | 0             | %    |  |   | 0         | %
|Expected volatility                    |  |      | 54-64          | % |      |   | 28            | %    |  |   | 28        | %
|Risk-free interest rate                |  |      | 4.35-5.21      | % |      |   | 3.76-4.55     | %    |  |   | 2.78-5.91 | %
|Expected life of options               |  |      | 3.5-3.75 years |   |      |   | 3.5-4.0 years |      |  |   | 5.0 years |  
|Weighted average grant date fair value |  | $    | 6.61           |   |      | $ | 4.12          |      |  | $ | 2.53      |  



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Net cash proceeds from the exercise of stock options were approximately $756,000 for the year ended
December 31, 2006. Compensation expense related to common stock options was approximately $476,000 for the year ended December 31, 2006. The tax benefit from the exercise of common stock options was not significant during 2006. At
December 31, 2006, there was $1,148,000 of unrecognized compensation cost related to share-based payments which is expected to be recognized over a weighted average period of 3.0 years.

The following table represents stock option activity as of and for the three years ended December 31, 2006:



|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|------------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | ---------------------------------------- | ---------- | ----------------------- | - | ---------
|                                      |  | Numberof Shares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractual Life |            | AggregateIntrinsicValue
|Options OutstandingDecember 31, 2003 |  | 620,017         |   |  | $                            | 6.89  |                                          |            |                         |   |          
|Granted                               |  | 116,000         |   |  |                              | 14.22 |                                          |            |                         |   |          
|Exercised                             |  | (142,500        | ) |  |                              | 7.14  |                                          |            |                         | $ | 882,000  
|Forfeited/cancelled/expired           |  | (19,500         | ) |  |                              | 11.10 |                                          |            |                         |   |          
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Options OutstandingDecember 31, 2004 |  | 574,017         |   |  | $                            | 6.89  |                                          |            |                         |   | 3,887,000
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Granted                               |  | 195,000         |   |  |                              | 14.07 |                                          |            |                         |   |          
|Exercised                             |  | (246,750        | ) |  |                              | 6.72  |                                          |            |                         | $ | 1,940,000
|Forfeited/cancelled/expired           |  | (17,500         | ) |  |                              | 8.01  |                                          |            |                         |   |          
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Options OutstandingDecember 31, 2005 |  | 504,767         |   |  | $                            | 11.16 |                                          |            |                         | $ | 1,513,000
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Granted                               |  | 204,000         |   |  |                              | 15.42 |                                          |            |                         |   |          
|Exercised                             |  | (75,255         | ) |  |                              | 10.04 |                                          |            |                         | $ | 528,000  
|Forfeited/cancelled/expired           |  | (51,462         | ) |  |                              | 14.49 |                                          |            |                         |   |          
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Options OutstandingDecember 31, 2006 |  | 582,050         |   |  | $                            | 13.18 |                                          | 2.89 years |                         | $ | 778,000  
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Options ExercisableDecember 31, 2006 |  | 355,968         |   |  | $                            | 10.90 |                                          | 2.03 years |                         | $ | 778,000  
|                                      |  |                 |   |  |                              |       |                                          |            |                         |   |          

The total grant date fair value of options vested during the years ended December 31, 2006,
2005 and 2004 was approximately $469,000, $511,000 and $317,000, respectively.

The following table summarizes information about
outstanding and exercisable stock options at December 31, 2006:



|                        |  |                        |  |                                |       |                                   |      |                        |         |                                |   |      
|----------------------- |  | ---------------------- |  | ------------------------------ | ----- | --------------------------------- | ---- | ---------------------- | ------- | ------------------------------ | - | -----
|                        |  | Outstanding Options    |  |                                |       | Exercisable Options              
|Range of ExercisePrices |  | Outstanding at12/31/06 |  | Weighted AverageExercise Price |       | RemainingContractual Life inYears |      | Exercisable at12/31/06 |         | Weighted AverageExercise Price
|$5.64 - $6.99           |  | 65,773                 |  | $                              | 6.57  |                                   | 1.30 |                        | 65,773  |                                | $ | 6.57 
|$7.05 - $8.40           |  | 110,994                |  |                                | 7.16  |                                   | 0.36 |                        | 110,994 |                                |   | 7.16 
|$12.55 - $15.90         |  | 308,283                |  |                                | 14.37 |                                   | 3.61 |                        | 171,701 |                                |   | 14.65
|$18.40 - $22.04         |  | 97,000                 |  |                                | 20.79 |                                   | 4.56 |                        | 7,500   |                                |   | 18.40
|                        |  |                        |  |                                |       |                                   |      |                        |         |                                |   |      
|                        |  | 582,050                |  | $                              | 13.18 |                                   | 2.89 |                        | 355,968 |                                | $ | 10.90
|                        |  |                        |  |                                |       |                                   |      |                        |         |                                |   |      

Pursuant to an agreement we entered into in connection with our initial public offering, 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 were exercisable at $9.90 per share. The warrant holder exercised 41,890
and 54,210 warrants in the years ended December 31, 2005, respectively. The remaining 3,900 warrants expired on October 25, 2005.



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10. Employee Benefit Plan

In 2003, the Company adopted the UTEK Corporation Simple IRA Plan (the Plan) for employees of the Company and its subsidiaries. The Plan allows employees who satisfy the service requirements of the
Plan to contribute pre-tax wages to the Plan, subject to legal limits, $10,000 in 2006 with catch up deferrals of an additional $2,000 for participants age 50 and older. The Company matches 100% of the first 3% of wages contributed by
employees. The Companys matching contributions vest immediately and were approximately $72,000, $58,000 and $23,000 in 2006, 2005 and 2004, respectively.

11. Acquisitions

2006 Acquisitions

On March 30, 2006, the Company entered into an agreement and plan of acquisition with 22nd Street of Ybor City, Inc. to acquire all of its issued and
outstanding shares of capital stock for an aggregate purchase price of $2.0 million. 22nd Street of Ybor City, Inc. is a real estate holding company that owns a commercial real estate property in Tampa, Florida. UTEK acquired 100% of the outstanding
shares of 22nd Street of Ybor City, Inc. through the issuance of 82,919 shares of unregistered common stock with a market value of $1.0 million plus a cash payment of $1.0 million. The acquired business will be operated by UTEK Real Estate Holdings,
Inc., one of UTEKs portfolio companies.

2005 Acquisitions:

On January 29, 2005, the Company purchased 100% of the outstanding stock of INTRA-DMS, Ltd. for $300,000 in unregistered shares of the Companys common stock. Accordingly, the results of operations for
INTRA-DMS, Ltd. have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of expanding our strategic alliance services with the analysis of intellectual property. As one
of our wholly-owned subsidiaries, INTRA-DMS, Ltd. has changed its name to UTEKip, Ltd.

On July 7, 2005, the Company purchased
100% of the assets of Knowledge Express Data Systems (Knowledge Express); a U.S. based on-line IP information service, for $1,500,000 in cash. Knowledge Express is positioned to service the IP needs of UTEK, its subsidiaries and its
customers. The purchase price has been allocated to the underlying assets purchased (and liabilities) based on their estimated fair values. The resulting goodwill from this transaction is approximately $1,500,000.

2004 Acquisitions:

On November 29, 2004, the
Company purchased 100% of the outstanding stock of UTEK-EKMS, Inc. for $300,000 in unregistered shares of the Companys common stock. Accordingly, the results of operations for UTEK-EKMS, Inc. have been included in the accompanying consolidated
financial statements from that date forward. The acquisition was made for the purpose of expanding our strategic alliance services with the analysis of intellectual property.

On December 16, 2004, the Company purchased 100% of the outstanding stock of Pharma-Transfer, Ltd. for $435,000 in unregistered shares of the
Companys common stock. Accordingly, the results of operations for Pharma-Transfer, Ltd. have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of expanding our
online technology-transfer services.



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On December 29, 2004, the Company purchased 100% of the outstanding stock of ABM of Tampa Bay,
Inc. for $300,000 in unregistered shares of the Companys common stock. The sole asset consists of land and therefore, there are no operating results included in the accompanying consolidated financial statements. The acquisition was made for
the purpose of a potential expansion of the corporate offices.

The value of the stock issued in the acquisitions noted above was
determined based on the average market price of the shares over the five days before the terms of the acquisition agreements were agreed upon and publicly announced.

Following is a condensed balance sheet showing the fair values of the assets acquired and the liabilities assumed as of the respective dates of acquisition:



|                                                  |  |                 |         |                      |   |              |  |                   |         |  |   |          
|------------------------------------------------- |  | --------------- | ------- | -------------------- | - | ------------ |  | ----------------- | ------- |  | - | ---------
|                                                  |  | UTEK-EKMS, Inc. |         | PharmaTransfer, Ltd. |   | UTEKip, Ltd. |  | Knowledge Express
|Assets                                            |  |                 |         |                      |   |              |  |                   |         |  |   |          
|Cash and cash equivalents                         |  | $               | 27,578  |                      | $ | 2,610        |  | $                 |        |  | $ | 26,423   
|Accounts receivable net of allowance for bad debt |  |                 | 69,094  |                      |   | 18,045       |  |                   | 18,780  |  |   | 141,100  
|Prepaid Expenses and other current assets         |  |                 | 8,489   |                      |   |             |  |                   |        |  |   | 97,477   
|Fixed assets                                      |  |                 | 15,000  |                      |   | 1,658        |  |                   | 14,788  |  |   | 113,000  
|Intangible assets                                 |  |                 | 25,000  |                      |   | 123,263      |  |                   | 74,396  |  |   | 150,000  
|Goodwill acquired in the acquisition              |  |                 | 426,869 |                      |   | 528,553      |  |                   | 246,773 |  |   | 1,488,110
|                                                  |  |                 |         |                      |   |              |  |                   |         |  |   |          
|                                                  |  |                 | 572,030 |                      |   | 674,129      |  |                   | 354,737 |  |   | 2,016,110
|                                                  |  |                 |         |                      |   |              |  |                   |         |  |   |          
|Liabilities                                       |  |                 |         |                      |   |              |  |                   |         |  |   |          
|Accrued Expenses                                  |  |                 | 23,738  |                      |   | 74,549       |  |                   | 31,221  |  |   | 58,102   
|Deferred Income                                   |  |                 |        |                      |   | 164,580      |  |                   |        |  |   | 458,008  
|Short term debt                                   |  |                 | 248,292 |                      |   |             |  |                   | 23,516  |  |   |         
|                                                  |  |                 |         |                      |   |              |  |                   |         |  |   |          
|                                                  |  |                 | 272,030 |                      |   | 239,129      |  |                   | 54,737  |  |   | 516,110  
|                                                  |  |                 |         |                      |   |              |  |                   |         |  |   |          
|Net assets acquired                               |  | $               | 300,000 |                      | $ | 435,000      |  | $                 | 300,000 |  | $ | 1,500,000
|                                                  |  |                 |         |                      |   |              |  |                   |         |  |   |          

Condensed balance sheet information for the 2006 acquisition of 22nd Street of Ybor City, Inc. has
not been presented because the business is operated under UTEKs portfolio companies. Pro forma financial information for the acquisitions has not been presented as the impact would be immaterial.

12. Segment Reporting

The Companys principal
area of activity is technology transfer services. The Company has three reportable operating segments: United Kingdom, Israel and the United States. The United Kingdom segment includes our wholly owned subsidiaries UTEK-Europe, Ltd. and Pharma
Transfer, Ltd., the Israel segment includes UTEK-ip, Ltd., and the United States segment includes UTEK Corporation and UTEK-EKMS, Inc., which was dissolved into UTEK Corporation during 2006.

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



|                                    |  |                |           |        |   |               |  |              |            |  |   |           
|----------------------------------- |  | -------------- | --------- | ------ | - | ------------- |  | ------------ | ---------- |  | - | ----------
|                                    |  | United Kingdom |           | Israel |   | United States |  | Consolidated
|Long-lived assets December 31, 2006 |  | $              | 580,916   |        | $ | 18,611        |  | $            | 3,206,737  |  | $ | 3,806,264 
|Total assets December 31, 2006      |  |                | 719,238   |        |   | 71,771        |  |              | 52,249,801 |  |   | 53,040,810
|Long-lived assets December 31, 2005 |  |                | 509,222   |        |   | 313,039       |  |              | 2,960,130  |  |   | 3,782,391 
|Total assets December 31, 2005      |  |                | 1,251,491 |        |   | 432,453       |  |              | 47,322,016 |  |   | 49,005,960



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                               |  |                                      |          |   |        |   |          |               |  |              |            |  |   |           
|-------------------------------------------------------------- |  | ------------------------------------ | -------- | - | ------ | - | -------- | ------------- |  | ------------ | ---------- |  | - | ----------
|                                                               |  | For the year ended December 31, 2006
|                                                               |  | UnitedKingdom                        |          |   | Israel |   |          | United States |  | Consolidated
|Income from Operations                                         |  | $                                    | 398,087  |   |        | $ | 182,371  |               |  | $            | 56,372,479 |  | $ | 56,952,937
|Income (loss) before interest, other expenses and income taxes |  |                                      | (330,263 | ) |        |   | (521,447 | )             |  |              | 32,880,854 |  |   | 32,029,144
|Depreciation and amortization                                  |  |                                      | 3,546    |   |        |   | 17,274   |               |  |              | 191,113    |  |   | 211,933   
|                                                               | 
|                                                               |  | For the year ended December 31, 2005
|Income from Operations                                         |  | $                                    | 830,316  |   |        | $ | 204,596  |               |  | $            | 21,708,911 |  | $ | 22,743,823
|Income (loss) before interest, other expenses and income taxes |  |                                      | (140,017 | ) |        |   | (232,292 | )             |  |              | 9,824,366  |  |   | 9,452,057 
|Depreciation and amortization                                  |  |                                      | 25,485   |   |        |   | 17,943   |               |  |              | 101,006    |  |   | 144,434   
|                                                               | 
|                                                               |  | For the year ended December 31, 2004
|Income from Operations                                         |  | $                                    | 605,745  |   |        | $ |         |               |  | $            | 6,582,870  |  | $ | 7,188,615 
|Income (loss) before interest, other expenses and income taxes |  |                                      | (120,250 | ) |        |   |         |               |  |              | 1,649,772  |  |   | 1,529,522 
|Depreciation and amortization                                  |  |                                      | 2,989    |   |        |   |         |               |  |              | 50,190     |  |   | 53,179    

---

|(1) | Pharma Transfer Ltd. was purchased in December 2004, therefore there is minimal Pharma Transfer Ltd. financial information included in the United Kingdom operations in the year
ended December 31, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | UTEK-ip, Ltd. was purchased in January 2005, therefore there is no financial information included in the Israel operations or assets for the year ended December 31, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Knowledge Express Data Systems was purchased on July 7, 2005, therefore there is no financial information included in the United States operations or assets for the year ended
December 31, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13. 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.

Effective September 1, 2004, the Company entered into a three year employment agreement with its
Chief Executive Officer, Clifford M. Gross, providing for an annual base salary of $300,000 for his services. In addition to his salary, Dr. Gross will receive a reasonable allowance for an automobile and certain severance benefits.

The Company entered into an employment agreement with our Chief Operating Officer and Chief Compliance Officer, Douglas Schaedler, effective
March 8, 2006. The term of the agreement is for one year and provides for an annual salary of $175,000. Additionally, Mr. Schaedler will receive a commission of 3% on new strategic alliance sales, a cash bonus of up to $105,000 if certain
performance targets are met and certain severance benefits.

The Company leases its office facilities and certain equipment for various
terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2010 and provide for various renewal options. In the normal course of business, it is expected that these leases will be renewed or replaced
by leases on other properties. The leases provide for increases in future minimum annual rental



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



payments. The Companys corporate headquarters are leased from Ybor City Group, Inc. a wholly owned subsidiary of a portfolio company. See footnote 12.
Lease expense charged to operations for the years ended December 31, 2006, 2005 and 2004 was approximately $277,000, $122,000 and $78,000 respectively.

The following is a schedule by year of future minimum rental payments required under the operating lease agreements:



|     |  |   |        
|---- |  | - | -------
|2007 |  | $ | 267,578
|2008 |  |   | 260,402
|2009 |  |   | 141,713
|2010 |  |   | 1,301  
|     |  |   |        
|     |  | $ | 670,994
|     |  |   |        

14. Related Party Transactions

Sam Reiber, the Companys General Counsel and a member of the Board of Directors, is also a partner with the law firm Linsky & Reiber in
Tampa, Florida. Linsky & Reiber has received approximately $56,000, $58,000 and $18,000 in compensation in 2006, 2005 and 2004, respectively, for services performed for the Company. Linsky & Reiber also holds 6,100 shares of the
Companys common stock as of December 31, 2006.

During the year ended December 31, 2006, the Company loaned funds for
operations and real estate improvements of approximately $1.1 million to Ybor City Group, Inc., a wholly owned subsidiary of UTEK Real Estate Holdings, Inc., one of the Companys portfolio companies. In addition, the Company leases space for
its corporate headquarters from Ybor City Group. The lease agreement has a 36 month term commencing July 1, 2006 through June 30, 2009. The monthly lease payment is $17,414. The lease agreement provides for a 3% increase in the minimum
monthly rental payment effective on the lease anniversary. The UTEK paid rent of approximately $130,000 to Ybor City Group,, Inc. during the year ended December 31, 2006.

15. Interim Financial Information (Unaudited)



|                                                                 |  |          |            |   |         |   |            |              |  |   |             |   |  |   |             |  
|---------------------------------------------------------------- |  | -------- | ---------- | - | ------- | - | ---------- | ------------ |  | - | ----------- | - |  | - | ----------- | -
|Fiscal year 2006:                                                |  | March 31 |            |   | June 30 |   |            | September 30 |  |   | December 31 |  
|Income from operations (Revenue)                                 |  | $        | 11,807,006 |   |         | $ | 23,059,307 |              |  | $ | 13,612,176  |   |  | $ | 8,474,448   |  
|Net income from operations                                       |  |          | 3,609,574  |   |         |   | 9,767,356  |              |  |   | 4,026,601   |   |  |   | 2,540,676   |  
|Net increase (decrease) in net assets from operations            |  |          | 5,557,126  |   |         |   | 11,059,619 |              |  |   | (4,473,588  | ) |  |   | (17,053,955 | )
|Net increase (decrease) in net assets from operations per share: |  |          |            |   |         |   |            |              |  |   |             |   |  |   |             |  
|Basic                                                            |  | $        | 0.66       |   |         | $ | 1.25       |              |  |   | ($0.50      | ) |  |   | ($1.91      | )
|Diluted                                                          |  | $        | 0.65       |   |         | $ | 1.23       |              |  |   | ($0.50      | ) |  |   | ($1.91      | )
|                                                                 |  |          |            |  
|Fiscal year 2005:                                                |  |          |            |   |         |   |            |              |  |   |             |  
|Income from operations (Revenue)                                 |  | $        | 2,538,529  |   |         | $ | 2,542,797  |              |  | $ | 10,448,383  |   |  | $ | 7,214,114   |  
|Net income from operations                                       |  |          | 174,273    |   |         |   | 28,713     |              |  |   | 3,733,289   |   |  |   | 1,951,555   |  
|Net increase (decrease) in net assets from operations            |  |          | (2,961,173 | ) |         |   | (742,038   | )            |  |   | 5,663,261   |   |  |   | 135,625     |  
|Net increase (decrease) in net assets from operations per share: |  |          |            |   |         |   |            |              |  |   |             |   |  |   |             |  
|Basic                                                            |  |          | ($0.49     | ) |         |   | ($0.10     | )            |  | $ | 0.75        |   |  | $ | 0.02        |  
|Diluted                                                          |  |          | ($0.49     | ) |         |   | ($0.10     | )            |  | $ | 0.74        |   |  | $ | 0.02        |  



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                                 |  |   |           |   |  |   |           |   |  |   |            |   |  |   |          
|---------------------------------------------------------------- |  | - | --------- | - |  | - | --------- | - |  | - | ---------- | - |  | - | ---------
|Fiscal year 2004:                                                |  |   |           |   |  |   |           |   |  |   |           
|Income from operations (Revenue)                                 |  | $ | 410,099   |   |  | $ | 1,925,587 |   |  | $ | 2,040,486  |   |  | $ | 2,812,443
|Net income (loss) from operations                                |  |   | (278,339  | ) |  |   | 342,853   |   |  |   | 472,186    |   |  |   | 406,022  
|Net increase (decrease) in net assets from operations            |  |   | 8,427,057 |   |  |   | (774,189  | ) |  |   | (7,202,711 | ) |  |   | 1,809,927
|Net increase (decrease) in net assets from operations per share: |  |   |           |   |  |   |           |   |  |   |            |   |  |   |          
|Basic                                                            |  | $ | 1.70      |   |  |   | ($0.14    | ) |  |   | ($1.28     | ) |  | $ | 0.33     
|Diluted                                                          |  | $ | 1.60      |   |  |   | ($0.14    | ) |  |   | ($1.28     | ) |  | $ | 0.30     

16. Subsequent Events

In February 2007, we obtained a $4,000,000 uncommitted bank line of credit with the Bank of Tampa. The advances on the line of credit accrue interest (payable monthly) at prime (presently 8.25%). The principal and any
unpaid interest are due upon demand. This line is collateralized with commercial real estate owned by UTEK Real Estate Holdings, Inc. As of December 31, 2006, we had no outstanding debt.

In February 2007, UTEK entered into an equity monetization agreement with C.E. Unterberg, Towbin, LLC. (CEUT). Under this agreement and at
UTEKs request, CEUT will monetize a portion of select, restricted equity stakes that UTEK acquires through its technology transfer services. In consideration for providing these services, CEUT will receive a commission according to a sliding
scale, payment of which will be deducted from the proceeds of each sale following settlement.

In February 2007, UTEK entered into an
equity monetization agreement with vFinance Investments, Inc. (VFIN). Under this agreement and at UTEKs request, VFIN will monetize a portion of select, restricted equity stakes that UTEK acquires through its technology transfer
services. In consideration for providing these services, VFIN will receive a commission according to a sliding scale, payment of which will be deducted from the proceeds of each sale following settlement.

The Board of Directors has authorized the Company to repurchase from time to time in the open market up to $4 million of shares of its common stock
during the next twelve months. The Board of Directors directed the Companys management to repurchase shares of the Companys common stock at such times and in such amounts as management determines to be appropriate. The Company will
use its cash on hand to fund any repurchases and is not obligated to acquire any particular amount of common stock pursuant to the repurchase program, which may be suspended at any time.



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UTEK Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



17. Selected Per Share Date and Ratios



|                                                                                                 |  |                        |            |    |      |   |            |      |  |   |            |   |  |      |            |   |  |   |           |   
|------------------------------------------------------------------------------------------------ |  | ---------------------- | ---------- | -- | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | --------- | --
|                                                                                                 |  | Year Ended December 31 |           
|                                                                                                 |  | 2006                   |            |    | 2005 |   |            | 2004 |  |   | 2003       |   |  | 2002 |           
|Per share information: (1)                                                                       |  |                        |            |    |      |   |            |      |  |   |            |   |  |      |            |   |  |   |           |   
|Net asset value, beginning of year                                                               |  | $                      | 5.58       |    |      | $ | 3.85       |      |  | $ | 2.33       |   |  | $    | 1.87       |   |  | $ | 2.53      |   
|Net income from operations (1)                                                                   |  |                        | 2.27       |    |      |   | .80        |      |  |   | .15        |   |  |      | 0.04       |   |  |   | 0.04      |   
|Net change in realized and unrealized appreciation/depreciation on investments (after taxes) (2) |  |                        | (3.45      | )  |      |   | (1.70      | )    |  |   | (0.22      | ) |  |      | (0.59      | ) |  |   | (0.73     | ) 
|                                                                                                 |  |                        |            |    |      |   |            |      |  |   |            |   |  |      |            |   |  |   |           |   
|Total from investment operations                                                                 |  |                        | (1.18      | )  |      |   | (0.90      | )    |  |   | (0.07      | ) |  |      | (0.55      | ) |  |   | (0.69     | ) 
|Foreign currency translation adjustment (1)                                                      |  |                        | 0.02       |    |      |   | (0.02      | )    |  |   | 0.01       |   |  |      | 0.01       |   |  |   | 0.01      |   
|Distributions to shareholders (1)                                                                |  |                        | (0.04      | )  |      |   |           |      |  |   |           |   |  |      |           |   |  |   |          |   
|Net increase from stock transactions (1)                                                         |  |                        | 1.33       |    |      |   | 2.65       |      |  |   | 1.58       |   |  |      | 1.00       |   |  |   | 0.02      |   
|                                                                                                 |  |                        |            |    |      |   |            |      |  |   |            |   |  |      |            |   |  |   |           |   
|Net asset value, end of year                                                                     |  | $                      | 5.71       |    |      | $ | 5.58       |      |  | $ | 3.85       |   |  | $    | 2.33       |   |  | $ | 1.87      |   
|                                                                                                 |  |                        |            |    |      |   |            |      |  |   |            |   |  |      |            |   |  |   |           |   
|Per share market value, end of year                                                              |  | $                      | 11.34      |    |      | $ | 13.79      |      |  | $ | 14.99      |   |  | $    | 11.10      |   |  | $ | 6.25      |   
|Investment return, based on market price at end of period                                        |  |                        | (18        | %) |      |   | (8         | %)   |  |   | 35         | % |  |      | 78         | % |  |   | (12       | %)
|                                                                                                 |  |                        |            |    |     
|Ratios/supplemental data:                                                                        |  |                        |            |    |      |   |            |      |  |   |            |   |  |      |            |   |  |   |           |   
|Net assets, end of year                                                                          |  | $                      | 50,981,162 |    |      | $ | 44,441,118 |      |  | $ | 23,092,943 |   |  | $    | 11,152,370 |   |  | $ | 7,346,057 |   
|Ratio of expenses to average net assets                                                          |  |                        | 52         | %  |      |   | 39         | %    |  |   | 33         | % |  |      | 38         | % |  |   | 36        | % 
|Ratio of net income from operations to average net assets                                        |  |                        | 42         | %  |      |   | 17         | %    |  |   | 6          | % |  |      | 2          | % |  |   | 2         | % 
|Diluted weighted average number of shares outstanding during the year                            |  |                        | 8,786,605  |    |      |   | 7,325,312  |      |  |   | 6,098,537  |   |  |      | 4,266,918  |   |  |   | 3,921,535 |   

---

|(1) | Calculated based on diluted weighted average number of shares outstanding during the year.
|--- | ------------------------------------------------------------------------------------------

|(2) | Calculated as a balancing amount necessary to reconcile the change in net assets value per share with the other per share information presented. This amount may not agree with the
aggregate gains and losses for the period because difference in the net asset value at the beginning and end of year does not inherently equal the per share changes of the line items disclosed.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) that is required to be disclosed in the reports we filed or submit under the Securities Exchange Act of
1934.

Managements Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Rule 13a-15(f) under the Securities Act of 1934, and for the assessment of the effectiveness of internal control over financial reporting. Managements report on internal control over financial reporting is set forth under the heading
Report of Management on Internal Control over Financial Reporting. Managements assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, has been audited by Pender Newkirk &
Company LLP, our independent registered public accounting firm, as stated in the report that is set forth under the heading Report of Independent Registered Public Accounting Firm.

Attestation Report of the Registered Public Accounting Firm

Our independent registered public accounting firm, Pender Newkirk & Company LLP, has issued an attestation report on managements assessment of the Companys internal control over financial reporting, which is set forth
under the heading Report of Independent Registered Public Accounting Firm.

Changes in Internal Control over Financial Reporting

There was no significant change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934) that occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.Other Information

In February 2007, we obtained a $4,000,000 uncommitted
bank line of credit with the Bank of Tampa. The advances on the line of credit accrue interest (payable monthly) at prime (presently 8.25%). The principal and any unpaid interest are due upon demand. This line is collateralized with commercial real
estate owned by UTEK Real Estate Holdings, Inc. As of December 31, 2006, we had no outstanding debt.

On February 21, 2007, we
entered into an equity monetization agreement (the Agreement) with vFinance Investments, Inc. (VFIN). The Agreement provides that, at our request, VFIN will sell on our behalf certain equity securities of publicly traded
companies that we have held for less than twelve months and we received in connection with our technology transfer transactions. The Agreement is for twelve months. In consideration for providing these services, VFIN will receive a
commission based on the relationship of the sale price to the market price of the security on the date of the transaction. The Agreement is non-exclusive and we have the right to sell any such equity securities by any other means if VFIN is
unable to consummate a sale of any portion of such equity securities within five business days.



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PART III

Item 10.Directors, Executive Officers and Corporate Governance

The information set forth
under the captions NOMINEES, MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES, CORPORATE GOVERNANCE and SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE in our Proxy Statement for the 2007
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.

Code of Business Conduct and Ethics for Directors and Employees

We have adopted a Code of Business Conduct and Ethics for all of our directors and employees, including our Chief Executive Officer and Chief Financial Officer. We have posted a copy of our Code of Business Conduct
and Ethics on our Internet website at www.utekcorp.com. Any waivers of the Code of Business Conduct and Ethics must be approved, in advance, by our full Board of Directors. Any amendments to, or waivers from the Code of Business Conduct and
Ethics that apply to our executive officers and directors will be posted on our Internet website located at www.utekcorp.com.

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 2007 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 and Related Stockholder Matters

The information set forth under the captions SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS and EQUITY COMPENSATION PLANS in our Proxy Statement for the 2007 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 13.Certain Relationships and Related Transactions, and Director Independence

The
information set forth under the captions CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS and DIRECTOR INDEPENDENCE in our Proxy Statement for the 2007 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.Principal Accountant Fees and Services

The information set forth under the
captions AUDIT FEES and AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES in our Proxy Statement for the 2007Annual 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.

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a) Documents filed as part of this
report:



| | 1. | The following Financial Statements of UTEK Corporation are contained in Item 8 of this Form 10-K:
| | -- | -------------------------------------------------------------------------------------------------



| |  |  | Consolidated Statements of Assets and Liabilities at December 31, 2006 and 2005
| | - |  | -------------------------------------------------------------------------------



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| |  |  | Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Consolidated Statements of Changes in Net Assets for the years ended December 31, 2006, 2005 and 2004
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Consolidated Schedule of Investments at December 31, 2006 and 2005
| | - |  | ------------------------------------------------------------------



| |  |  | Notes to Consolidated Financial Statements
| | - |  | ------------------------------------------



| |  |  | Selected Per Share Data and Ratios for the years ended December 31, 2006, 2005, 2004, 2003, and 2002
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Report of Independent Registered Public Accounting Firm
| | - |  | -------------------------------------------------------



| |  |  | Report of Management on Internal Control over Financial Reporting
| | - |  | -----------------------------------------------------------------



| |  |  | Report of Independent Registered Public Accounting Firm
| | - |  | -------------------------------------------------------



| | 2. | The following financial statement schedules are filed herewith:
| | -- | ---------------------------------------------------------------

Schedule 12-14 of Investments in and Advances to Affiliates.

In addition, there may be additional schedules not provided
because (i) such schedules are not required or (ii) the information required has been presented in the aforementioned financial statements.



| | 3. | 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:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|      |  |                                                                                                                                                                                                                                                                                                                                                      
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|3.1   |  | 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. (Incorporated by reference to Exhibit 3.1
to the Companys registration statement on Form N-2 (File No. 333-93913) filed with the Commission on December 30, 1999.)                                   
|      | 
|3.2   |  | 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. (Incorporated by
reference to Exhibit 3.2 to the Companys registration statement on Form N-2 (File No. 333-93913) filed with the Commission on December 30, 1999.)
|      | 
|3.3   |  | By-Laws of UTEK Corporation. (Incorporated by reference to Exhibit 3.3 to the Companys registration statement on Form N-2 (File No. 333-93913) filed with the Commission on December 30,
1999.)                                                                                                                                                     
|      | 
|3.4   |  | Certificate of Amendment to Certificate of Incorporation dated July 23, 2001, as filed and recorded with the Secretary of State of the State of Delaware on July 24, 2001. (Incorporated by
reference to Exhibit 3.4 to the Companys Form 10-K filed with the Commission on April 1, 2002.)                                                         
|      | 
|10.1  |  | Amended and Restated Employee Stock Option Plan. (Incorporated by reference to Appendix A to UTEK Corporations Proxy Statement filed on June 30, 2005.)                                                                                                                                                                                             
|      | 
|10.2  |  | Amended and Restated Non-Qualified Stock Option Plan of UTEK Corporation. (Incorporated by reference to Exhibit 10.2 to UTEK Corporations Form 10-Q for the quarter ended June 30,
2005.)                                                                                                                                                           
|      | 
|10.3  |  | Employment Agreement between UTEK Corporation and Clifford M. Gross. (Incorporated by reference to Exhibit No. 10.1 filed with the Companys Form 8-K filed on September 9,
2004.)                                                                                                                                                                   
|      | 
|10.4  |  | Employment Agreement between UTEK Corporation and Douglas C. Schaedler. (Incorporated by reference to Exhibit No. 10.1 filed with the Companys Form 8-K filed on March 14,
2006.)                                                                                                                                                                   
|      | 
|10.5  |  | Form of Incentive Stock Option Agreement. (Incorporated by reference to Exhibit 10.1 to UTEK Corporations Form 10-Q for the quarter ended June 30, 2005.)                                                                                                                                                                                           
|      | 
|10.13 |  | Corporate Custody Agreement dated May 29, 2003 between UTEK Corporation and Bank of Tampa. (Incorporated by reference to Exhibit 99.j filed with the Companys Registration Statement on Form
N-2 on October 26, 2005.)                                                                                                                              



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|      |  |                                                                                                                                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.14 |  | Corporate Custody Agreement dated July 18, 2006 between UTEK Corporation and Gunn Allen Financial, Inc. (Incorporated by reference to Exhibit 99.i.1 filed with the Companys Registration
Statement on Form N2/A on July 19, 2006.)
|      | 
|10.16 |  | Form of strategic Alliance Agreement. (Incorporated by reference to Exhibit 99.k.1 filed with the Companys Registration Statement on Form N-2 on October 26, 2005.)                                                                
|      | 
|10.17 |  | Form of Agreement and Plan of Acquisition for Technology Transfer Transactions. (Incorporated by reference to Exhibit 99.k.2 filed with the Companys Registration Statement on Form N-2 on
January 9, 2006.)                       
|      | 
|10.18 |  | Form of UniversityUTEK Alliance and Confidentiality Agreement. (Incorporated by reference to Exhibit 99.k.3 filed with the Companys Registration Statement on Form N-2 on January 9,
2006.)                                       
|      | 
|10.19 |  | Agreement and Plan of Acquisition, dated September 27, 2005 between the Company and Ybor City Group, Inc. (Incorporated by reference to Exhibit No. 2.1 filed with the Companys Form 8-K
filed on October 5, 2005.)                
|      | 
|11.1  |  | Computation of per share earnings is included in Item 8 of this Form 10-K.                                                                                                                                                          
|      | 
|21.1  |  | Subsidiaries of the registrant, and jurisdiction of incorporation/organization: UTEK Europe, Ltd., - United Kingdom and UTEKip, Ltd. - Israel.                                                                                      
|      | 
|31.1* |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.                                                                                                     
|      | 
|31.2* |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.                                                                                                     
|      | 
|32.1* |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.                                                                                                     
|      | 
|32.2* |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.                                                                                                     
|      | 
|99.1* |  | Code of Ethics.                                                                                                                                                                                                                     
|      | 
|99.2* |  | Note with The Bank of Tampa: Commercial Security Agreement, Business Loan Agreement and Promissory Note.                                                                                                                            
|      | 
|99.3* |  | vFinance Investments, Inc., Equity Monetization Agreement, dated as of February 22, 2007.                                                                                                                                           

---

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



81



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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 February 28, 2007.



UTEK CORPORATIONBy:

/s/    CLIFFORD M.
GROSSClifford M. Gross, Ph.D.Chairman and 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.



|                                                       |  |                                                                      |  |                  
|------------------------------------------------------ |  | -------------------------------------------------------------------- |  | -----------------
|Signature                                              |  | Title (Capacity)                                                     |  | Date             
|                                                       |  |                                                                     
|/s/    CLIFFORD M.
GROSS Clifford M. Gross             |  | Chairman and Chief Executive Officer (Principal Executive Officer)   |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    CAROLE R.
WRIGHT Carole R. Wright               |  | Chief Financial Officer (Principal Financial and Accounting Officer) |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    SAM
REIBER Sam Reiber                           |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    STUART M.
BROOKS Stuart M. Brooks               |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    HOLLY
CALLEN-HAMILTON Holly Callen-Hamilton     |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    KWABENA
GYIMAH-BREMPONG Kwabena Gyimah-Brempong |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    ARTHUR
CHAPNIK Arthur Chapnik                   |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    JOHN
MICEK John Micek                           |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    KEITH A.
WITTER Keith A. Witter                 |  | Director                                                             |  | February 28, 2007
|                                                       |  |                                                                     
|/s/    FRANCIS
MAUDE Francis Maude                     |  | Director                                                             |  | February 28, 2007



82



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Schedule 12-14

UTEK CORPORATION

Schedule of Investments in and Advances to Affiliates



|                                                                                   |  |                                                              |   |                        |   |                     |  |                     |                 |  |                        |                    |    |  |   |                 
|---------------------------------------------------------------------------------- |  | ------------------------------------------------------------ | - | ---------------------- | - | ------------------- |  | ------------------- | --------------- |  | ---------------------- | ------------------ | -- |  | - | ----------------
|Portfolio Company and Investment                                                   |  | Year EndedDecember 31, 2006 Amountof Interest orDividends(1) |   | December 31,2005 Value |   | Gross Additions (2) |  | GrossReductions (3) |                 |  | December 31,2006 Value
|Affiliate Investments                                                              |  |                                                              |   |                        |   |                     |  |                     |                 |  |                        |                    |    |  |   |                 
|Trio Industries Group, Inc. Common stock                                           |  | $                                                            |  |                        | $ | 4,985,486           |  | $                   | 8,333,191       |  | ($                     | 13,318,677         | )  |  | $ |                
|Fuel FX International, Inc. (privately held) Common stock Preferred Series B stock |  |                                                              |  |                        |   | 1,980,143          |  |                     | 16,5732,100,000 |  |                        | (165,116(1,110,000 | )) |  |   | 1,831,600990,000
|Health Sciences Group, Inc. Common stock                                           |  |                                                              |  |                        |   | 874,637             |  |                     |                |  |                        | (779,437           | )  |  |   | 95,200          
|GS Energy Corporation (INSEQ Corp.) Common stock                                   |  |                                                              |  |                        |   | 727,174             |  |                     |                |  |                        | (457,374           | )  |  |   | 269,800         
|HydroFlo, Inc. (4) Common stock                                                    |  |                                                              |  |                        |   | 596,296             |  |                     |                |  |                        | (596,296           | )  |  |   |                
|Manakoa Services Company Common stock                                              |  |                                                              |  |                        |   | 504,739             |  |                     | 34,188          |  |                        | (123,927           | )  |  |   | 415,000         
|Clean Water Technologies, Inc. Common stock                                        |  |                                                              |  |                        |   | 92,235              |  |                     |                |  |                        | (92,235            | )  |  |   |                
|TenthGate, Inc.(5) Common stock                                                    |  |                                                              |  |                        |   | 3,840               |  |                     | 40,000          |  |                        | (18,240            | )  |  |   | 25,600          
|Stealth MediaLabs, Inc. Common stock                                               |  |                                                              |  |                        |   |                    |  |                     | 121,600         |  |                        |                   |    |  |   | 121,600         
|Myrmidon Biomaterials, Inc., ( privately held) Common stock                        |  |                                                              |  |                        |   |                    |  |                     |                |  |                        |                   |    |  |   |                
|DME Interactive Holdings (5) Common stock                                          |  |                                                              |  |                        |   |                    |  |                     | 1,344,600       |  |                        |                   |    |  |   | 1,344,600       
|Cytodyn, Inc. (5) Common stock                                                     |  |                                                              |  |                        |   |                    |  |                     | 3,640,772       |  |                        | (2,783,972         | )  |  |   | 856,800         
|Cargo Connection Logistics Holdings, Inc. Common stock                             |  |                                                              |  |                        |   |                    |  |                     | 1,033,434       |  |                        | (390,134           | )  |  |   | 643,300         
|Avalon Oil and Gas, Inc. Common stock                                              |  |                                                              |  |                        |   |                    |  |                     | 1,986,939       |  |                        | (1,122,739         | )  |  |   | 864,200         
|WebSky Inc. Common stock                                                           |  |                                                              |  |                        |   |                    |  |                     | 897,750         |  |                        | (223,150           | )  |  |   | 674,600         
|Liberty Diversified Holdings, Inc. Common stock                                    |  |                                                              |  |                        |   |                    |  |                     | 1,245,257       |  |                        | (1,057,657         | )  |  |   | 187,600         
|NetFabric Holdings (5) Common stock                                                |  |                                                              |  |                        |   |                    |  |                     | 608,694         |  |                        | (214,694           | )  |  |   | 394,000         
|                                                                                   |  |                                                              |   |                        |   |                     |  |                     |                 |  |                        |                    |    |  |   |                 
|                                                                                   |  |                                                              |   |                        |  
|Total Investments in Affiliates                                                    |  | $                                                            |  |                        | $ | 9,764,550           |  | $                   | 21,402,998      |  | $                      | (22,453,648        | )  |  | $ | 8,713,900       
|                                                                                   |  |                                                              |   |                        |   |                     |  |                     |                 |  |                        |                    |    |  |   |                 





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|                                                                       |  |                                                              |     |                        |   |                     |  |                     |            |  |                        |            |   |  |   |           
|---------------------------------------------------------------------- |  | ------------------------------------------------------------ | --- | ---------------------- | - | ------------------- |  | ------------------- | ---------- |  | ---------------------- | ---------- | - |  | - | ----------
|Portfolio Company and Investment                                       |  | Year EndedDecember 31,2006 Amountof Interest orDividends (1) |     | December 31,2005 Value |   | Gross Additions (2) |  | GrossReductions (3) |            |  | December 31,2006 Value
|Control Investments                                                    |  |                                                              |     |                        |   |                     |  |                     |            |  |                        |            |   |  |   |           
|UTEK Real Estate Holdings, Inc., (privately held) Common Stock         |  | $                                                            |    |                        | $ | 1,888,396           |  | $                   | 2,005,000  |  | ($                     | 278,896    | ) |  | $ | 3,614,500 
|Klegg Electronics, Inc(6) Common stock                                 |  |                                                              |    |                        |   |                    |  |                     | 3,820,274  |  |                        | (610,374   | ) |  |   | 3,209,900 
|Industrial Biotechnology Corporation (6) Common stock                  |  |                                                              |    |                        |   |                    |  |                     | 4,181,930  |  |                        | (2,186,030 | ) |  |   | 1,995,900 
|Ybor City Group, Inc. (privately held) Demand note, interest rate @ 5% |  |                                                              |    |                        |   |                    |  |                     | 1,181,472  |  |                        |           |   |  |   | 1,181,472 
|                                                                       |  |                                                              |     |                        |   |                     |  |                     |            |  |                        |            |   |  |   |           
|                                                                       |  |                                                              |     |                        |  
|Total Investment in Control Investment                                 |  |                                                              | -0- |                        | $ | 1,888,396           |  | $                   | 11,188,676 |  | $                      | (3,075,300 | ) |  | $ | 10,001,772
|                                                                       |  |                                                              |     |                        |   |                     |  |                     |            |  |                        |            |   |  |   |           

This schedule should be read in conjunction with the Companys consolidated financial statements including the
schedule of investments.

Notes to Schedule of Investments in and Advances to Affiliates



|(1) | All of the listed securities with the exception of the demand note issued by Ybor City Group, Inc. are generally non-income producing. In addition all of the listed securities are
restricted securities within the meaning of Rule 144 of the Securities Act of 1933. In some cases, preferred stock may also be non-income producing. The principal amount for debt and the number of shares of common stock and preferred
stock is shown in the Schedule of Investments as of December 31, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Gross additions include increases in the cost basis of investments resulting from new portfolio investments, and the movement of an existing portfolio company into this category
from a different category. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Gross reductions include decreases in the cost basis of investments resulting from the sale of portfolio investments, and the movement of an existing portfolio company out of this
category into a different category. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | During the year ended December 31, 2006, the Company reclassified this investment from Affiliate investments to Non-affiliate investments.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



|(5) | During the year ended December 31, 2006, the Company reclassified this investment from Non-affiliated investments to Affiliate investments.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|(6) | During the year ended December 31, 2006, the Company reclassified this investment from Affiliate investments to Control investments.
|--- | ------------------------------------------------------------------------------------------------------------------------------------